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EXHIBIT 10.3
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 17, 1997
BY AND AMONG
MAC-GRAY II, INC.,
▇▇▇-▇▇▇▇ CO., INC.,
▇▇▇-▇▇▇▇ ACQUISITION CORP.,
SUN SERVICES OF AMERICA, INC.,
▇. ▇▇▇▇▇▇ COIN-OP-LAUNDRY, INC.
AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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AGREEMENT AND PLAN OF MERGER
INDEX
Page
SECTION 1. THE MERGERS.................................................................. 2
1.1 The Mergers.................................................................. 2
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1.2 Closing...................................................................... 2
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1.3 Effective Times.............................................................. 2
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1.4 Effects of the Mergers....................................................... 2
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1.5 Certificate of Incorporation and By-laws of the Surviving Corporations....... 3
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1.6 Board of Directors and Officers.............................................. 3
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1.7 Income Tax Treatment of the Mergers.......................................... 3
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1.8 Allocation of the Aggregate Consideration to be Received by Stockholder...... 4
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SECTION 2. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; OTHER ACTIONS AT THE CLOSING................................... 4
2.1 Effect of SSA Merger on Capital Stock........................................ 4
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2.2 Effect of ▇▇▇▇▇▇ Merger on Capital Stock..................................... 5
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2.3 SSA Merger; Surrender of Certificates; Stock Transfer Books.................. 5
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2.4 ▇▇▇▇▇▇ Merger; Surrender of Certificates; Stock Transfer Books............... 6
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2.5 Other Actions at the Closing................................................. 7
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF SSA, ▇▇▇▇▇▇ AND THE STOCKHOLDER............ 8
3.1 Making of Representations and Warranties..................................... 8
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3.2 Organization and Qualifications of SSA and ▇▇▇▇▇▇............................ 8
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3.3 Capital Stock; Beneficial Ownership.......................................... 8
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3.4 Subsidiaries; Acquisitions................................................... 9
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3.5 Required Action; Authority................................................... 9
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3.6 No Conflicts.................................................................10
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3.7 Taxes........................................................................10
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3.8 Leases.......................................................................12
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3.9 Equipment....................................................................12
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3.10 Title........................................................................13
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3.11 No Litigation; Compliance....................................................13
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3.12 Employee Benefit Programs....................................................13
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3.13 Financial Statements and Projections.........................................15
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3.14 Ordinary Course..............................................................16
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3.15 Absence of Certain Changes...................................................16
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3.16 Contracts....................................................................18
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3.17 Insurance....................................................................19
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3.18 Approvals; Consents..........................................................19
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3.19 Banking Relationships........................................................19
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(i)
Page
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3.20 Hazardous Materials..........................................................19
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3.21 Intellectual Property........................................................20
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3.22 Books and Records............................................................21
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3.23 Transactions with Interested Persons.........................................21
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3.24 No Brokers...................................................................21
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3.25 Disclosure...................................................................21
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3.26 Commission Payments..........................................................21
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3.27 Labor Matters................................................................21
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3.28 Blue Eagle Leases............................................................22
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SECTION 4. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.................22
4.1 Investment Representations...................................................22
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4.2 Agreements...................................................................23
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF PARENT, ▇▇▇-▇▇▇▇ AND SUB...................23
5.1.................................................................................23
5.2 Organization.................................................................24
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5.3 Capital Stock; Beneficial Ownership..........................................24
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5.4 Subsidiaries.................................................................25
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5.5 Required Action; Authority...................................................25
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5.6 No Conflicts.................................................................25
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5.7 No Litigation; Compliance....................................................26
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5.8 Financial Statements.........................................................26
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5.9 Taxes........................................................................26
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5.10 Leases.......................................................................28
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5.11 Assets; Title................................................................28
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5.12 Employee Benefit Programs....................................................28
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5.13 Ordinary Course..............................................................30
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5.14 Absence of Certain Changes...................................................30
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5.15 Contracts....................................................................31
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5.16 Insurance....................................................................31
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5.17 Approvals; Consents..........................................................32
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5.18 Hazardous Materials..........................................................32
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5.19 Transactions with Interested Persons.........................................32
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5.20 No Brokers...................................................................32
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5.21 Disclosure...................................................................32
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5.22 Books and Records............................................................33
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5.23 Intellectual Property........................................................33
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(ii)
5.24 Labor Matters................................................................33
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SECTION 6. DELIVERIES AT THE CLOSING....................................................34
6.1 Deliveries by the Company and the Stockholder................................34
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6.2 Deliveries by Parent, ▇▇▇-▇▇▇▇ and Sub.......................................35
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6.3 Joint Deliveries of the Parties..............................................35
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6.4 Other Actions................................................................36
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SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.................................36
7.1 Survival of Warranties.......................................................36
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SECTION 8. INDEMNIFICATION..............................................................36
8.1 Indemnification by the Stockholder...........................................36
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8.2 Limitations on Indemnification by the Stockholder............................38
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8.3 Indemnification by Parent, ▇▇▇-▇▇▇▇ and Sub..................................39
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8.4 Limitation on Indemnification by Parent, ▇▇▇-▇▇▇▇ and Sub....................39
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8.5 Notice; Defense of Claims....................................................39
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8.6 Exclusive Remedy.............................................................40
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SECTION 9. MISCELLANEOUS................................................................40
9.1 Fees and Expenses............................................................40
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9.2 Governing Law................................................................40
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9.3 Notices......................................................................41
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9.4 Entire Agreement.............................................................41
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9.5 Assignability; Binding Effect................................................42
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9.6 Captions and Gender..........................................................42
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9.7 Execution in Counterparts....................................................42
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9.8 Amendments...................................................................42
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9.9 Publicity and Disclosures....................................................42
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9.10 Covenant of Parent, ▇▇▇-▇▇▇▇ and Sub.........................................42
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9.11 Covenant of Stockholder......................................................42
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(iii)
SCHEDULES AND EXHIBITS
Schedules
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Schedule 3.4 - Subsidiaries
Schedule 3.6 - Conflicts
Schedule 3.8 - Leases
Schedule 3.9 - Equipment
Schedule 3.10 - Assets; Liens
Schedule 3.11 - Litigation
Schedule 3.12 - Employee Matters; Benefits
Schedule 3.13(a) - Financial Statements
Schedule 3.13(b) - Liabilities
Schedule 3.13(c) - Projections
Schedule 3.15 - Certain Changes
Schedule 3.16 - Contracts and Commitments
Schedule 3.17 - Insurance
Schedule 3.18 - Approvals; Consents
Schedule 3.19 - Banking Relationships
Schedule 3.21 - Intellectual Property
Schedule 3.23 - Affiliated Transactions
Schedule 3.26 - Commission Payments
Schedule 5.3(a)(i) - Parent Capitalization; Voting Agreements
Schedule 5.3(a)(ii) - Parent Post-Merger Capitalization
Schedule 5.3(b) - ▇▇▇-▇▇▇▇ Capitalization
Schedule 5.4(b) - ▇▇▇-▇▇▇▇ Subsidiaries
Schedule 5.8 - ▇▇▇-▇▇▇▇ Financial Statements
Schedule 5.9 - ▇▇▇-▇▇▇▇ Taxes
Schedule 5.11 - ▇▇▇-▇▇▇▇ Assets; Liens
Schedule 5.12(a) - ▇▇▇-▇▇▇▇ Employee Programs
Schedule 5.12(b) - ▇▇▇-▇▇▇▇ Employee Program Matters
Schedule 5.14 - ▇▇▇-▇▇▇▇ Changes
Schedule 5.15 - ▇▇▇-▇▇▇▇ Contracts
Schedule 5.16 - ▇▇▇-▇▇▇▇ Insurance
Schedule 5.17 - ▇▇▇-▇▇▇▇ Approvals
Schedule 5.19 - ▇▇▇-▇▇▇▇ Affiliated Transactions
Schedule 5.23 - ▇▇▇-▇▇▇▇ Intellectual Property
Exhibits
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Exhibit 1.3(a) - SSA Certificate of Merger
Exhibit 1.3(b) - ▇▇▇▇▇▇ Certificate of Merger
Exhibit 1.3(c) - SSA Articles of Merger
Exhibit 1.3(d) - ▇▇▇▇▇▇ Articles of Merger
(iv)
Exhibit 2.5(a)(i) - L.P. Assignment and Exchange Agreement
Exhibit 2.5(a)(ii) - Agreement and Plan of Merger between ▇▇▇-▇▇▇▇ and
the Partnership
Exhibit 2.5(b) - Stock Exchange Agreement
Exhibit 6.1(f) - Opinion of ▇▇▇▇▇ & Lardner
Exhibit 6.2(f) - Opinion of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇
Exhibit 6.3(b) - Consulting Agreement
Exhibit 6.3(c) - Noncompetition Agreement
Exhibit 6.3(d) - Stockholders' Agreement
(v)
AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of April 17, 1997 by and among Mac-Gray II, Inc., a Delaware corporation
("Parent"), ▇▇▇-▇▇▇▇ Acquisition Corp., a Delaware corporation ("Sub"), ▇▇▇-▇▇▇▇
Co., Inc., a Delaware corporation ("▇▇▇-▇▇▇▇"), Sun Services of America, Inc., a
Florida corporation ("SSA"), ▇. ▇▇▇▇▇▇ Coin-Op-Laundry, Inc., a Florida
corporation ("▇▇▇▇▇▇," and, together with SSA, the "Company"), and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (the "Stockholder").
WHEREAS, the Stockholder is the legal and beneficial owner of all of the
issued and outstanding common stock, par value $1.00 per share, of SSA ("SSA
Stock");
WHEREAS, the Stockholder is the legal and beneficial owner of all of the
issued and outstanding common stock, par value $1.00 per share, of ▇▇▇▇▇▇
("▇▇▇▇▇▇ Stock");
WHEREAS, the Board of Directors of SSA has determined that the merger of
SSA with and into Parent (the "SSA Merger"), upon the terms and subject to the
conditions set forth herein, would be fair and in the best interests of the
Stockholder, and such Board of Directors has approved and the Stockholder has
approved this Agreement and the transactions contemplated hereby, including the
SSA Merger;
WHEREAS, the Board of Directors of ▇▇▇▇▇▇ has determined that the merger of
Sub with and into ▇▇▇▇▇▇ (the "▇▇▇▇▇▇ Merger," and, together with the SSA
Merger, the "Mergers"), upon the terms and subject to the conditions set forth
herein, would be fair and in the best interests of the Stockholder, and such
Board of Directors has approved and the Stockholder has approved this Agreement
and the transactions contemplated hereby, including the ▇▇▇▇▇▇ Merger;
WHEREAS, the Board of Directors of Parent has determined that each of the
SSA Merger and the ▇▇▇▇▇▇ Merger (together, the "Mergers"), upon the terms and
subject to the conditions set forth herein, would be fair and in the best
interests of the stockholders of Parent and has approved this Agreement and the
transactions contemplated hereby, including the Mergers;
WHEREAS, the Board of Directors of Sub has determined that the ▇▇▇▇▇▇
Merger, upon the terms and subject to the conditions set forth herein, would be
fair and in the best interests of the stockholder of Sub and such Board of
Directors has approved and such stockholder has approved this Agreement and the
transactions contemplated hereby;
WHEREAS, pursuant to the SSA Merger and as set forth in Section 2.1 hereof,
each share of SSA Stock issued and outstanding immediately prior to the
effectiveness of the SSA Merger, other than shares of SSA Stock held by SSA in
its treasury, shall be converted into the right to receive cash and shares of
common stock, par value $.01 per share, of Parent ("Parent Common Stock"); and
WHEREAS, pursuant to the ▇▇▇▇▇▇ Merger and as set forth in Section 2.2
hereof, each share of ▇▇▇▇▇▇ Stock issued and outstanding immediately prior to
the effectiveness of the ▇▇▇▇▇▇
Merger, other than shares of ▇▇▇▇▇▇ Stock held by ▇▇▇▇▇▇ in its treasury, shall
be converted into the right to receive shares of Parent Common Stock.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements, and upon the terms and subject to the conditions, herein set
forth, the parties hereto hereby agree as follows:
SECTION 1. THE MERGERS.
1.1 The Mergers. Upon the terms and subject to the conditions set forth
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in this Agreement, and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and the Florida Business Corporation Act (the
"FBCA"), (a) SSA shall be merged with and into Parent at the SSA Effective Time
(as defined in Section 1.3) and (b) Sub shall be merged with and into ▇▇▇▇▇▇ at
the ▇▇▇▇▇▇ Effective Time (as defined in Section 1.3). At the SSA Effective
Time, the separate existence of SSA shall cease and Parent shall continue as the
surviving corporation (the "SSA Surviving Corporation"). At the ▇▇▇▇▇▇
Effective Time, the separate existence of Sub shall cease and ▇▇▇▇▇▇ shall
continue as the surviving corporation (the "▇▇▇▇▇▇ Surviving Corporation").
1.2 Closing. The closing of the Mergers (the "Closing") shall take place
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at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇, commencing at 9:00 a.m. on the date of this Agreement (the "Closing
Date"). Except as otherwise expressly provided in this Agreement or in any
document contemplated by this Agreement, all matters at the Closing shall be
considered to take place simultaneously and no delivery of any documents shall
be deemed complete until all transactions and deliveries of documents are
completed.
1.3 Effective Times. As soon as practicable on the Closing Date, the
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parties hereto shall (a) file with the Secretary of State of the State of
Delaware a certificate of merger with respect to the SSA Merger in the form
attached hereto as Exhibit 1.3(a) (the "SSA Certificate") and a certificate of
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merger with respect to the ▇▇▇▇▇▇ Merger in the form attached hereto as Exhibit
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1.3(b) (the "▇▇▇▇▇▇ Certificate) and (b) file with the Secretary of State of the
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State of Florida articles of merger with respect to the SSA Merger in the form
attached hereto as Exhibit 1.3 (the "SSA Articles") and articles of merger with
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respect to the ▇▇▇▇▇▇ Merger in the form attached hereto as Exhibit 1.3(d) (the
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"▇▇▇▇▇▇ Articles"). The SSA Merger shall become effective at such time as the
SSA Certificate has been duly filed with the Secretary of State of the State of
Delaware and the SSA Articles have been duly filed with the Secretary of State
of the State of Florida (the "SSA Effective Time"). The ▇▇▇▇▇▇ Merger shall
become effective at such time as the ▇▇▇▇▇▇ Certificate has been duly filed with
the Secretary of State of the State of Delaware and the ▇▇▇▇▇▇ Articles have
been duly filed with the Secretary of State of the State of Florida (the "▇▇▇▇▇▇
Effective Time").
1.4 Effects of the Mergers. Each Merger shall have the effects set forth
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in Section 259 of the DGCL (or any successor provisions thereof) and Section
607.1106 of the FBCA (or any successor provisions thereof).
2
1.5 Certificate of Incorporation and By-laws of the Surviving
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Corporations. The Certificate of Incorporation and By-laws of Parent, as in
effect immediately prior to the SSA Effective Time, shall be the Certificate of
Incorporation and By-laws of the SSA Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law. The Articles of
Incorporation and By-laws of ▇▇▇▇▇▇, as in effect immediately prior to the
▇▇▇▇▇▇ Effective Time, shall be the Articles of Incorporation and By-laws of the
▇▇▇▇▇▇ Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
1.6 Board of Directors and Officers.
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(a) SSA Surviving Corporation. From and after the SSA Effective
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Time, the Board of Directors of the SSA Surviving Corporation will consist of
such persons as will have been designated by Parent in the SSA Certificate, each
such Director to hold office, subject to the applicable provisions of the
Certificate of Incorporation and the By-Laws of the SSA Surviving Corporation,
until the next annual meeting of stockholders of the SSA Surviving Corporation
and until his successor shall be duly elected or appointed and qualified. From
and after the SSA Effective Time, the officers of the SSA Surviving Corporation
will consist of such persons as will have been designated by Parent in the SSA
Certificate, such persons to hold office until their respective successors are
duly elected or appointed and qualified. If, at or after the SSA Effective Time,
a vacancy shall exist in the Board of Directors or in any of the offices of the
SSA Surviving Corporation by reason of death or inability to act, or for any
other reason, such vacancy may be filled in the manner provided in the By-Laws
of the SSA Surviving Corporation.
(b) ▇▇▇▇▇▇ Surviving Corporation. From and after the ▇▇▇▇▇▇
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Effective Time, the Board of Directors of the ▇▇▇▇▇▇ Surviving Corporation will
consist of such persons as will have been designated by Parent in the ▇▇▇▇▇▇
Certificate and the ▇▇▇▇▇▇ Articles, each such Director to hold office, subject
to the applicable provisions of the Articles of Incorporation and the By-Laws of
the ▇▇▇▇▇▇ Surviving Corporation, until the next annual meeting of stockholders
of the ▇▇▇▇▇▇ Surviving Corporation and until his successor shall be duly
elected or appointed and qualified. From and after the ▇▇▇▇▇▇ Effective Time,
the officers of the ▇▇▇▇▇▇ Surviving Corporation will consist of such persons as
will have been designated by Parent in the ▇▇▇▇▇▇ Certificate and the ▇▇▇▇▇▇
Articles, such persons to hold office until their respective successors are duly
elected or appointed and qualified. If, at or after the ▇▇▇▇▇▇ Effective Time, a
vacancy shall exist in the Board of Directors or in any of the offices of the
▇▇▇▇▇▇ Surviving Corporation by reason of death or inability to act, or for any
other reason, such vacancy may be filled in the manner provided in the By-Laws
of the ▇▇▇▇▇▇ Surviving Corporation.
1.7 Income Tax Treatment of the Mergers. It is intended that the SSA
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Merger will be treated as a tax-free reorganization described in (S)368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended (the "Code"). It is intended
(i) that the ▇▇▇▇▇▇ Merger will be treated as a tax-free reorganization
described in (S)368(a)(2)(E) of the Code and (ii) that the following
transactions, which are occurring simultaneously, will be treated as exchanges
qualifying under (S)351 of the Code: the exchange of the ▇▇▇▇▇▇ Stock by the
Stockholder for Parent Common Stock in the ▇▇▇▇▇▇ Merger, the SSA Merger, the
transfer of the common stock of ▇▇▇-▇▇▇▇ by the
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stockholders of ▇▇▇-▇▇▇▇ to Parent in exchange for Parent Common Stock (as more
fully described below), and the transfer of the limited partnership interests in
the Partnership to Parent by the limited partners of the Partnership in exchange
for Parent Common Stock (as more fully described below). All parties to this
Agreement agree to report the aforementioned transactions, for all purposes,
consistently with the foregoing.
1.8 Allocation of the Aggregate Consideration to be Received by
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Stockholder. The Stockholder will receive 25% of the total consideration to be
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received by the Stockholder (the "Aggregate Consideration") in the form of
Parent Common Stock which the Stockholder will receive in exchange for all of
the issued and outstanding ▇▇▇▇▇▇ Stock. The Stockholder will receive the
remaining 75% of the Aggregate Consideration in the form of cash and Parent
Common Stock, in exchange for all of the issued and outstanding SSA Stock.
SECTION 2. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; OTHER ACTIONS AT THE CLOSING.
2.1 Effect of SSA Merger on Capital Stock. As of the SSA Effective Time,
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by virtue of the SSA Merger and without any action on the part of Parent, ▇▇▇-
▇▇▇▇, SSA or the Stockholder:
(a) Cancellation of Treasury Stock. Each share of SSA Stock that is
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owned by SSA or by any subsidiary of SSA shall automatically be canceled and
retired and shall cease to exist, and no cash or other consideration shall be
delivered or deliverable in exchange therefor.
(b) Conversion of SSA Stock. Each issued and outstanding share of
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SSA Stock shall be converted into and represent the right to receive by
Stockholder (i) $64,666.67 in cash and (ii) 14,157.40 shares of Parent Common
Stock.
(c) Cancellation and Retirement of SSA Stock. As of the SSA
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Effective Time, all shares of SSA Stock issued and outstanding immediately prior
to the SSA Effective Time (other than shares to be canceled as provided in
Section 2.1(a)) shall no longer be outstanding, shall automatically be canceled
and retired and shall cease to exist, and the Stockholder shall cease to have
any rights with respect thereto, except the right to receive the applicable
consideration to be paid therefor upon surrender of such certificate in
accordance with Section 2.3.
(d) No Fractional Shares. No fractions of a share of Parent Common
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Stock shall be issued in the Merger, but in lieu thereof the Stockholder shall,
upon surrender of his certificate or certificates, be entitled to receive
pursuant to Section 2.3(a) an amount of cash (without interest) determined to be
equal to the fractional share interest to which the Stockholder would otherwise
be entitled.
2.2 Effect of ▇▇▇▇▇▇ Merger on Capital Stock. As of the ▇▇▇▇▇▇ Effective
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Time, by virtue of the ▇▇▇▇▇▇ Merger and without any action on the part of
Parent, ▇▇▇-▇▇▇▇, Sub, ▇▇▇▇▇▇ or the Stockholder:
4
(a) Common Stock of Sub. Each share of common stock, par value $.01
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per share, of Sub ("Sub Common Stock") issued and outstanding immediately prior
to the ▇▇▇▇▇▇ Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common stock, par value
$1.00 per share, of the ▇▇▇▇▇▇ Surviving Corporation. From and after the ▇▇▇▇▇▇
Effective Time, each outstanding certificate theretofore representing shares of
Sub Common Stock shall be deemed for all purposes to evidence ownership of and
to represent the number of shares of common stock of the ▇▇▇▇▇▇ Surviving
Corporation into which such shares of Sub Common Stock shall have been
converted. Promptly after the ▇▇▇▇▇▇ Effective Time, the ▇▇▇▇▇▇ Surviving
Corporation shall issue to Parent a stock certificate representing 1,000 shares
of common stock, par value $1.00 per share, of the ▇▇▇▇▇▇ Surviving Corporation
in exchange for the certificate or certificates which formerly represented 1,000
shares of Sub Common Stock, which certificate or certificates shall thereupon be
canceled.
(b) Cancellation of Treasury Stock. Each share of ▇▇▇▇▇▇ Stock that
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is owned by ▇▇▇▇▇▇ or by any subsidiary of ▇▇▇▇▇▇ shall automatically be
canceled and retired and shall cease to exist, and no Parent Common Stock or
other consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of ▇▇▇▇▇▇ Stock. Each issued and outstanding share of
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▇▇▇▇▇▇ Stock shall be converted into and represent the right to receive by
Stockholder 187.304 shares of Parent Common Stock.
(d) Cancellation and Retirement of ▇▇▇▇▇▇ Stock. As of the ▇▇▇▇▇▇
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Effective Time, all shares of ▇▇▇▇▇▇ Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled as provided in
Section 2.2(b)) shall no longer be outstanding, shall automatically be canceled
and retired and shall cease to exist, and the Stockholder shall cease to have
any rights with respect thereto, except the right to receive the applicable
consideration to be paid therefor upon surrender of such certificate in
accordance with Section 2.4.
(e) No Fractional Shares. No fractions of a share of Parent Common
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Stock shall be issued in the ▇▇▇▇▇▇ Merger, but in lieu thereof the Stockholder
shall, upon surrender of his certificate or certificates, be entitled to receive
pursuant to Section 2.4(a) an amount of cash (without interest) determined to be
equal to the fractional share interest to which the Stockholder would otherwise
be entitled.
2.3 SSA Merger; Surrender of Certificates; Stock Transfer Books.
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(a) At the SSA Effective Time, upon surrender to the SSA Surviving
Corporation by the Stockholder of a certificate or certificates representing the
Stockholder's shares of SSA Stock (other than shares to be canceled as provided
in Section 2.1(a)), the SSA Surviving Corporation shall (i) deliver to the
Stockholder a certificate representing the 424,722 Parent Shares (as defined
below) to which the Stockholder is entitled pursuant to Section 2.1(b) and (ii)
pay to the Stockholder, by wire transfer in immediately available funds to an
account designated by the Stockholder (which account shall be designated by
Stockholder not less than five (5) business days prior to the Closing Date), an
amount in cash equal to $1,940,000 which the Stockholder is
5
entitled pursuant to Section 2.1(b) and any cash payable in lieu of fractional
shares of Parent Common Stock to which the Stockholder is entitled pursuant to
Section 2.1(d).
(b) Until so surrendered and exchanged as provided in paragraph (a)
above, each certificate representing shares of SSA Stock (other than shares to
be canceled as provided in Section 2.1(a)) shall, from and after the SSA
Effective Time, be deemed to represent only the right to receive the
consideration to which the Stockholder is entitled pursuant to Section 2.1 of
this Agreement. No interest will be paid or will accrue on the cash to be paid
pursuant to Section 2.1(b) if payment thereof is not made because the
certificate representing SSA Stock was not surrendered. Upon surrender of each
certificate representing shares of SSA Stock, such certificate shall forthwith
be canceled.
(c) If payment of any cash in respect of shares of SSA Stock
surrendered to the SSA Surviving Corporation is to be made to a person other
than the Stockholder, it shall be a condition to such payment that the
certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Stockholder shall have paid any transfer
and other taxes required by reason of such payment or shall have established to
the satisfaction of Parent that such tax either has been paid or is not payable.
(d) At the SSA Effective Time, the stock transfer books of SSA shall
be closed and there shall be no further registration of transfers of shares of
SSA Stock thereafter on the records of the Company. From and after the SSA
Effective Time, the Stockholder shall cease to have any rights as a stockholder
of SSA or otherwise with respect to such shares, except as otherwise provided
herein or by applicable law.
(e) Notwithstanding anything to the contrary in this Section 2.3,
neither the SSA Surviving Corporation nor any party hereto shall be liable to
the Stockholder for any amount properly paid to a public official pursuant to
any applicable property, escheat or similar law.
2.4 ▇▇▇▇▇▇ Merger; Surrender of Certificates; Stock Transfer Books.
--------------------------------------------------------------
(a) At the ▇▇▇▇▇▇ Effective Time, upon surrender to the ▇▇▇▇▇▇
Surviving Corporation by the Stockholder of a certificate or certificates
representing the Stockholder's shares of ▇▇▇▇▇▇ Stock (other than shares to be
canceled as provided in Section 2.2(b)), the ▇▇▇▇▇▇ Surviving Corporation shall
deliver to the Stockholder a certificate representing the 187,304 Parent Shares
(as defined below) to which the Stockholder is entitled pursuant to Section 2.2
and any cash payable in lieu of fractional shares of Parent Common Stock to
which the Stockholder is entitled pursuant to Section 2.2(e).
(b) Until so surrendered and exchanged as provided in paragraph (a)
above, each certificate representing shares of ▇▇▇▇▇▇ Stock (other than shares
to be canceled as provided in Section 2.2(b)) shall, from and after the ▇▇▇▇▇▇
Effective Time, be deemed to represent only the right to receive the
consideration to which the Stockholder is entitled pursuant to Section 2.2 of
this Agreement. No interest will be paid or will accrue on the cash to be paid
pursuant to Section 2.2(c) if payment thereof is not made because the
certificate representing ▇▇▇▇▇▇ Stock was not
6
surrendered. Upon surrender of each certificate representing shares of ▇▇▇▇▇▇
Stock, such certificate shall forthwith be canceled.
(c) If payment of any cash in respect of shares of ▇▇▇▇▇▇ Stock
surrendered to the ▇▇▇▇▇▇ Surviving Corporation is to be made to a person other
than the Stockholder, it shall be a condition to such payment that the
certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Stockholder shall have paid any transfer
and other taxes required by reason of such payment or shall have established to
the satisfaction of Parent that such tax either has been paid or is not payable.
(d) At the ▇▇▇▇▇▇ Effective Time, the stock transfer books of ▇▇▇▇▇▇
shall be closed and there shall be no further registration of transfers of
shares of ▇▇▇▇▇▇ Stock thereafter on the records of ▇▇▇▇▇▇. From and after the
▇▇▇▇▇▇ Effective Time, the Stockholder shall cease to have any rights as a
stockholder of ▇▇▇▇▇▇ or otherwise with respect to such shares, except as
otherwise provided herein or by applicable law.
(e) Notwithstanding anything to the contrary in this Section 2.4,
neither the ▇▇▇▇▇▇ Surviving Corporation nor any party hereto shall be liable to
the Stockholder for any amount properly paid to a public official pursuant to
any applicable property, escheat or similar law.
2.5 Other Actions at the Closing.
----------------------------
(a) ▇▇▇-▇▇▇▇ Exchanges. Immediately prior to the earlier of (i) the
------------------
SSA Effective Time and (ii) the ▇▇▇▇▇▇ Effective Time, the following
transactions shall be consummated:
(A) The limited partners of ▇▇▇-▇▇▇▇, ▇.▇. (the "Partnership")
shall assign and transfer to Parent all of their respective limited partner
interests in the Partnership in exchange for shares of Parent Common Stock
pursuant to the Limited Partner Assignment and Exchange Agreement, in the
form attached hereto as Exhibit 2.5(a)(i), and the transactions
-----------------
contemplated thereby shall be consummated (the "LP Exchange").
(B) The stockholders of ▇▇▇-▇▇▇▇ shall assign and transfer to
Parent all of their respective shares of common stock, par value $1.00 per
share, of ▇▇▇-▇▇▇▇, in exchange for shares of Parent Common Stock pursuant
to the Stock Exchange Agreement, in the form attached hereto as Exhibit
-------
2.5(b), and the transactions contemplated thereby shall be consummated (the
------
"Stock Exchange," and, together with the LP Exchange and the Partnership
Merger (as defined below), the "▇▇▇-▇▇▇▇ Exchanges").
(b) Partnership Merger. Immediately following the consummation of
------------------
the Stock Exchange and the LP Exchange and the SSA Effective Time and the ▇▇▇▇▇▇
Effective Time, the Partnership shall merge with and into ▇▇▇-▇▇▇▇ pursuant to
the Agreement and Plan of Merger, in the form attached hereto as Exhibit
-------
2.5(a)(ii) (the "Partnership Merger").
----------
7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SSA, ▇▇▇▇▇▇ AND THE STOCKHOLDER.
3.1 Making of Representations and Warranties. As a material inducement
----------------------------------------
to each of Parent, ▇▇▇-▇▇▇▇ and Sub to enter into this Agreement and to
consummate the Mergers and the other transactions contemplated hereby, SSA,
▇▇▇▇▇▇ and the Stockholder, jointly and severally, hereby make to ▇▇▇-▇▇▇▇,
Parent and Sub the representations and warranties contained in this Section 3.
For the purposes of this Section 3, references to the "knowledge" or the "best
knowledge" of SSA and/or ▇▇▇▇▇▇ shall mean the collective actual knowledge of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
3.2 Organization and Qualifications of SSA and ▇▇▇▇▇▇. Each of SSA and
-------------------------------------------------
▇▇▇▇▇▇ is a corporation duly organized, validly existing and in good standing
under the laws of Florida with full corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is currently
conducted or proposed to be conducted. The copies of each of SSA's and ▇▇▇▇▇▇'▇
Articles of Incorporation and by-laws, each as amended to date, heretofore
delivered to Parent's counsel, are complete and correct, and no amendments
thereto are pending. Neither SSA nor ▇▇▇▇▇▇ is in violation of any term of its
Articles of Incorporation or by-laws. Each of SSA and ▇▇▇▇▇▇ is duly qualified
to do business as a foreign corporation under the laws of each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
and assets requires such qualification except where the absence of such
qualification could not reasonably be expected to, individually or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), properties, assets, liabilities, business, operation or prospects of
SSA or ▇▇▇▇▇▇.
3.3 Capital Stock; Beneficial Ownership.
-----------------------------------
(a) The authorized capital stock of SSA consists of 1,000 shares of
common stock, par value $1.00 per share, of which 30 shares are duly and validly
issued, outstanding, fully-paid and non-assessable. There are no outstanding
shares of any other class of capital stock of SSA, nor are there any outstanding
options, warrants, rights, commitments, preemptive rights, subscriptions or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, exchangeable for or carrying the right to acquire any
additional shares of capital stock of any class of SSA. None of SSA's capital
stock has been issued in violation of any federal or state law. There are no
voting trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the shares of SSA Stock to which SSA
or the Stockholder is a party.
(b) The authorized capital stock of ▇▇▇▇▇▇ consists of 7,000 shares
of common stock, par value $1.00 per share, of which 1,000 shares are duly and
validly issued, outstanding, fully-paid and non-assessable. There are no
outstanding shares of any other class of capital stock of ▇▇▇▇▇▇, nor are there
any outstanding options, warrants, rights, commitments, preemptive rights,
subscriptions or agreements of any kind for the issuance or sale of, or
outstanding securities convertible into, exchangeable for or carrying the right
to acquire any additional shares
8
of capital stock of any class of ▇▇▇▇▇▇. None of ▇▇▇▇▇▇'▇ capital stock has been
issued in violation of any federal or state law. There are no voting trusts,
voting agreements, proxies or other agreements, instruments or undertakings with
respect to the voting of the shares of ▇▇▇▇▇▇ Stock to which ▇▇▇▇▇▇ or the
Stockholder is a party.
(c) The Stockholder owns beneficially and of record all of the issued
and outstanding shares of capital stock of SSA, consisting entirely of 30 shares
of SSA Stock, free and clear of any liens, restrictions or encumbrances of any
kind or nature (collectively, "Liens"). By operation of law, the SSA Merger
will vest in Parent legal and valid title to all of the shares of SSA Stock,
free and clear of any Liens.
(d) The Stockholder owns beneficially and of record all of the issued
and outstanding shares of capital stock of ▇▇▇▇▇▇, consisting entirely of 1,000
shares of ▇▇▇▇▇▇ Stock, free and clear of any Liens. By operation of law, the
▇▇▇▇▇▇ Merger will vest in Parent legal and valid title to all of the shares of
▇▇▇▇▇▇ Stock, free and clear of any Liens.
3.4 Subsidiaries; Acquisitions. Neither SSA nor ▇▇▇▇▇▇ has any
--------------------------
subsidiaries or investments in any other corporation or business organization.
Except as set forth in Schedule 3.4 attached hereto, neither SSA nor ▇▇▇▇▇▇ has
------------
any rights or options (the "Acquisition Rights") to purchase or acquire the
capital stock or all or substantially all of the assets of any other corporation
or business organization (an "Acquisition"). Schedule 3.4 attached hereto sets
------------
forth the name of each of the entities subject to any Acquisition Rights, the
type of transaction contemplated by the parties in each Acquisition, the
termination rights, if any, associated with such Acquisition Rights, the number
of laundry machines and the location of such machines to be acquired in each
Acquisition and whether or not the consummation of the Mergers requires the
consent of the selling entity in order that the SSA Surviving Corporation or the
▇▇▇▇▇▇ Surviving Corporation, as the case may be, may legally succeed to such
Acquisition Rights after the Closing. Each of the Acquisition Rights is fully
enforceable, and, after the Closing, will be fully enforceable by the SSA
Surviving Corporation or the ▇▇▇▇▇▇ Surviving Corporation, as the case may be.
3.5 Required Action; Authority. All actions and proceedings necessary to
--------------------------
be taken by or on the part of SSA and ▇▇▇▇▇▇ in connection with the transactions
contemplated by this Agreement have been duly and validly taken, and this
Agreement has been duly and validly authorized, executed and delivered by SSA
and ▇▇▇▇▇▇. Each of SSA, ▇▇▇▇▇▇ and the Stockholder has full right, authority,
power and capacity to execute and deliver this Agreement, the Schedules and
Exhibits hereto and, to the extent such party is a party thereto, each
agreement, document and instrument to be executed and delivered by or on behalf
of it or him pursuant to, or as contemplated by, this Agreement (collectively,
the "Company Documents"), and to carry out the transactions contemplated hereby
and thereby. This Agreement and each other Company Document constitutes, or
when executed and delivered by SSA, ▇▇▇▇▇▇ and/or the Stockholder, as
applicable, will constitute, the legal, valid and binding obligation of SSA,
▇▇▇▇▇▇ and/or the Stockholder, as applicable, enforceable against SSA, ▇▇▇▇▇▇,
and/or the Stockholder, as applicable, in accordance with their respective terms
except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium, or other similar laws from time
9
to time in effect or affecting creditor's rights generally or by principles
governing the availability of equitable remedies.
3.6 No Conflicts. The execution, delivery and performance by SSA, ▇▇▇▇▇▇
------------
and the Stockholder of this Agreement and each other Company Document does not
and will not, with or without the giving of notice or the lapse of time or both,
(a) violate any provision of the Articles of Incorporation or by-laws of SSA or
▇▇▇▇▇▇, each as amended to date, (b) constitute a violation of, or conflict with
or result in any breach of, acceleration of any obligation under, right of
termination under, or default under, any agreement or instrument to which SSA,
▇▇▇▇▇▇ or the Stockholder is a party or by which SSA, ▇▇▇▇▇▇ or the Stockholder
is bound, (c) to the knowledge of SSA, ▇▇▇▇▇▇ or the Stockholder violate any
judgment, decree, order, statute, law, rule or regulation applicable to SSA,
▇▇▇▇▇▇ or the Stockholder, (d) except as provided on Schedule 3.6 attached
------------
hereto, require SSA, ▇▇▇▇▇▇ or the Stockholder to obtain any approval, consent
or waiver of, or to make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made or (e) result in the creation or
imposition of any Lien on any of the properties or assets of SSA or ▇▇▇▇▇▇ or
the SSA Stock or the ▇▇▇▇▇▇ Stock. Each of the officers who execute this
Agreement and the other Company Documents on behalf of SSA and ▇▇▇▇▇▇ have all
requisite power to do so in the name of and on behalf of SSA and ▇▇▇▇▇▇.
3.7 Taxes.
-----
(a) Each of SSA and ▇▇▇▇▇▇ has paid or caused to be paid all federal,
state, local, foreign, and other taxes, including without limitation, income
taxes, estimated taxes, alternative minimum taxes, excise taxes, sales taxes,
use taxes, value-added taxes, gross receipts taxes, franchise taxes, capital
stock taxes, employment and payroll-related taxes, withholding taxes, stamp
taxes, transfer taxes, windfall profit taxes, environmental taxes and property
taxes, whether or not measured in whole or in part by net income, and all
deficiencies, or other additions to tax, interest, fines and penalties owed by
it (collectively, "Taxes"), required to be paid by it through the date hereof
whether disputed or not.
(b) Each of SSA and ▇▇▇▇▇▇ has in accordance with applicable law
filed all federal, state, local and foreign tax returns required to be filed by
it through the date hereof, and all such returns correctly and accurately set
forth the amount of any Taxes relating to the applicable period. No federal,
state, local or foreign income tax return filed with respect to SSA or ▇▇▇▇▇▇
for any taxable period ended on or after December 31, 1991 has been audited or
is currently the subject of an audit. No extension of time with respect to any
date on which a tax return was or is to be filed by SSA or ▇▇▇▇▇▇ is in force,
and no waiver or agreement by SSA or ▇▇▇▇▇▇ is in force for the extension of
time for the assessment or payment of any Taxes.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting or, to the knowledge of SSA, ▇▇▇▇▇▇ and
the Stockholder, threatening to assert against SSA or ▇▇▇▇▇▇ any deficiency or
claim for additional Taxes. No claim has ever been made by an authority in a
jurisdiction where SSA or ▇▇▇▇▇▇ does not file reports and returns that such
entity is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of SSA or ▇▇▇▇▇▇ that arose in
connection with any failure (or alleged failure)
10
to pay any Taxes. Neither SSA nor ▇▇▇▇▇▇ has entered into a closing agreement
pursuant to Section 7121 of the Internal Revenue Code of 1986, as amended (the
"Code").
(d) Neither SSA nor ▇▇▇▇▇▇ has ever been (or has never had any
liability for unpaid Taxes because it once was) a member of an "affiliated
group" (as defined in Section 1504(a) of the Code). Neither SSA nor ▇▇▇▇▇▇ has
ever filed, or has ever been required to file, a consolidated, combined or
unitary tax return with any other entity. Neither SSA nor ▇▇▇▇▇▇ owns or has
ever owned a direct or indirect interest in any trust, partnership, corporation
or other entity. Neither SSA nor ▇▇▇▇▇▇ is a party to any tax sharing
agreement.
(e) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
(f) For federal income tax purposes, ▇▇▇▇▇▇ elected to be an S
corporation under (S)1362 of the Code effective for its taxable year beginning
on January 1, 1993 and has been an S corporation at all times since January 1,
1993; and for state income tax purposes, including but not limited to the State
of Florida, ▇▇▇▇▇▇ elected to be an S corporation effective for its taxable year
beginning on January 1, 1993 and has been an S corporation at all times since
January 1, 1993.
(g) For federal income tax purposes, SSA elected to be an S
corporation under (S)1362 of the Code effective for its taxable year beginning
on October 1, 1987 and has been an S corporation at all times since October 1,
1987; and for state income tax purposes, including but not limited to the State
of Florida, SSA elected to be an S corporation effective for its taxable year
beginning on October 1, 1987 and has been an S corporation at all times since
October 1, 1987.
(h) As of October 1, 1987, SSA had a net unrealized built-in gain
within the meaning of Code (S)1374(d)(1) of zero.
(i) As of January 1, 1993, ▇▇▇▇▇▇ had a net unrealized built-in gain
within the meaning of Code (S)1374(d)(1) of zero.
(j) The Stockholder has no present plan, intention, or arrangement to
dispose of any of the Parent Common Stock received in the SSA Merger in a manner
that would cause the SSA Merger to violate the continuity of interest
requirement set forth in Treasury Regulation (S)1.368-1.
(k) The Stockholder has no present plan, intention, or arrangement to
dispose of any of the Parent Common Stock received in the ▇▇▇▇▇▇ Merger in a
manner that would cause the ▇▇▇▇▇▇ Merger to violate the continuity of interest
requirement set forth in Treasury Regulation (S)1.368-1.
3.8 Leases. Schedule 3.8 attached hereto lists all of the contracts,
------ ------------
understandings and arrangements, whether written or oral, including any tenancy
at will, under which either SSA or
11
▇▇▇▇▇▇ is bound or to which either SSA or ▇▇▇▇▇▇ is a party which relate to the
placement of the laundry machines (the "Leases"). Schedule 3.8 attached hereto
------------
contains a true, correct and complete list of all Lease locations, Lease
expirations, the number of washers and dryers at each Lease location, vend
prices, net revenues after commission for each Lease location and whether the
terms of such Lease require the consent of or prior notice to any third party as
a result of the consummation of the Mergers. True and correct copies of all the
Leases have been delivered or made available to Parent prior to the date hereof.
Each of the Leases is valid, in full force and effect and binding upon SSA or
▇▇▇▇▇▇, as the case may be, and the other parties thereto in accordance with its
respective terms. Neither SSA, ▇▇▇▇▇▇ nor, to the knowledge of SSA, ▇▇▇▇▇▇ and
the Stockholder, any other party is in default under or in arrears in the
performance, payment or satisfaction of any agreement or condition on its part
to be performed or satisfied under any Lease, nor, to the knowledge of SSA,
▇▇▇▇▇▇ and the Stockholder, does any condition exist that with notice or lapse
of time or both would constitute such a default, and no waiver or indulgence has
been granted by any landlord under any Lease. Neither SSA, ▇▇▇▇▇▇ nor the
Stockholder has received notice or has knowledge of any fact which would result
in the termination, repudiation or breach of any Lease. Except as provided on
Schedule 3.6 attached hereto, SSA, ▇▇▇▇▇▇ and the Stockholder have obtained the
------------
consent and approvals of all other parties to each lease that requires such
consent or approval in connection with the consummation of the transactions
contemplated by this Agreement. After giving effect to the Mergers, each of the
Leases will be valid and effective in accordance with its terms, fully
enforceable by the SSA Surviving Corporation or the ▇▇▇▇▇▇ Surviving
Corporation, as the case may be, against the other party thereto.
3.9 Equipment. The laundry machines that are the subject of the Leases
---------
listed on Schedule 3.8 constitute all of the laundry machines which are owned
------------
and/or operated by SSA and ▇▇▇▇▇▇, except for laundry machines held in inventory
as set forth on Schedule 3.9 attached hereto. Schedule 3.9 attached hereto
------------ ------------
includes a true, correct and complete list of all of SSA's and ▇▇▇▇▇▇'▇
equipment, including but not limited to: (i) all washers and dryers, soap,
bleach and softener dispensers and change machines installed at the Lease
locations listed on Schedule 3.8; (ii) all inventory of new laundry machines,
------------
parts and accessories; (iii) all furniture and office equipment; and (iv) all
other equipment, fixtures, vehicles (whether owned or leased) and other capital
assets of SSA and ▇▇▇▇▇▇ (collectively the "Equipment"). Except as set forth on
Schedule 3.9, all of the Equipment described in clause (i) of the preceding
------------
sentence has generated revenue within the last 60 days. All of the Equipment,
excluding laundry machines that are being repaired or replaced in the ordinary
course of business, is in good operating condition, ordinary wear and tear
excepted, and the Equipment, and the normal use thereof, complies with all
applicable laws and regulations.
3.1 Title.
-----
(a) Except as set forth on Schedule 3.10 attached hereto, each of
-------------
SSA and ▇▇▇▇▇▇ has good and valid title to, or a valid leasehold interest in,
all of its Equipment, Leases and the other properties and assets which are used
in its business or otherwise material to its financial condition, free and clear
of all Liens. The aggregate borrowed money indebtedness of
12
SSA and ▇▇▇▇▇▇ as of the Closing is as set forth on Schedule 3.10 attached
-------------
hereto (the "Indebtedness").
(b) Schedule 3.10 attached hereto sets forth a list of all real
-------------
property owned by SSA and ▇▇▇▇▇▇ and any real property in which SSA or ▇▇▇▇▇▇
holds a leasehold interest. SSA and ▇▇▇▇▇▇ have delivered to Parent a true,
correct and complete copy of each such lease, as amended to date, and each such
lease is in full force and effect. No party to any such lease has given notice
to SSA or ▇▇▇▇▇▇ or made any claim with respect to any breach or default with
respect to any such lease. Neither SSA nor ▇▇▇▇▇▇ has granted to any other
person or entity the right to the use, occupancy or enjoyment of such lease.
After giving effect to the Mergers, each such lease will be fully enforceable by
the SSA Surviving Corporation and the ▇▇▇▇▇▇ Surviving Corporation, as the case
may be.
3.11 No Litigation; Compliance. Except as set forth on Schedule 3.11
------------------------- -------------
attached hereto, (a) neither SSA nor ▇▇▇▇▇▇ is now involved in nor, to the
knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder, is SSA or ▇▇▇▇▇▇ threatened to be
involved in any litigation or legal or other proceedings and (b) the Stockholder
is not now involved in nor to the knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder,
is the Stockholder threatened to be involved in any litigation or legal or other
proceedings relating to the business of SSA or ▇▇▇▇▇▇. To the knowledge of SSA,
▇▇▇▇▇▇ and the Stockholder, each of SSA and ▇▇▇▇▇▇ is in compliance with all
laws and governmental (federal, state and local) rules and regulations
applicable to it and its business. Neither SSA, ▇▇▇▇▇▇ nor the Stockholder has
been charged nor, to the knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder, is SSA,
▇▇▇▇▇▇ or the Stockholder threatened to be charged with any violation of any
provision of any federal, state or local law or administrative rule or
regulation relating to the assets or its business. Each of SSA and ▇▇▇▇▇▇ has
at all times possessed and currently possesses and has been and is in compliance
with all governmental permits, licenses and authorizations necessary for the
conduct of its business. All of such permits, licenses and authorizations are,
and upon the consummation of the Mergers will be, valid and in full force and
effect.
3.12 Employee Benefit Programs.
-------------------------
(a) Schedule 3.12 attached hereto lists every Employee Program (as
-------------
defined below) that has been maintained (as defined below) by SSA and/or ▇▇▇▇▇▇
at any time during the three-year period ending on the Closing Date.
(b) Each Employee Program which has ever been maintained by SSA
and/or ▇▇▇▇▇▇ and which has at any time been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the IRS regarding its qualification under such section and
has, in fact, been qualified under the applicable section of the Code from the
effective date of such Employee Program through and including the Closing (or,
if earlier, the date that all of such Employee Program's assets were
distributed). No event or omission has occurred which would cause any such
Employee Program to lose its qualification under the applicable Code section.
13
(c) SSA and/or ▇▇▇▇▇▇ does not know and has no reason to know, of any
failure of any party to comply with any laws applicable to the Employee Programs
that have been maintained by SSA and/or ▇▇▇▇▇▇. With respect to any Employee
Program ever maintained by SSA and/or ▇▇▇▇▇▇, there has occurred no "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly, in any taxes, penalties or
other liability to SSA, ▇▇▇▇▇▇, the SSA Surviving Corporation, the ▇▇▇▇▇▇
Surviving Corporation or Parent. No litigation, arbitration, or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program.
(d) Neither SSA or ▇▇▇▇▇▇ nor any Affiliate (as defined below) (i)
has ever maintained any Employee Program which has been subject to title IV of
ERISA (including, but not limited to, any Multiemployer Plan (as defined below))
or (ii) has ever provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA) or has ever promised to provide such post-
termination benefits.
(e) With respect to each Employee Program maintained by SSA and/or
▇▇▇▇▇▇ within the three years (3) preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to Parent: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably necessary for the SSA
Surviving Corporation, ▇▇▇▇▇▇ Surviving Corporation and Parent to perform any of
its responsibilities with respect to any Employee Program subsequent to the
Closing (including, without limitation, health care continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(4)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA, and (B) all stock option plans, bonus
14
or incentive award plans, severance pay policies or agreements, deferred
compensation agreements, supplemental income arrangements, vacation plans,
and all other employee benefit plans, agreements, and arrangements not
described in (A) above. In the case of an Employee Program funded through
an organization described in Code Section 501(c)(9), each reference to such
Employee Program shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "Affiliate" of SSA or ▇▇▇▇▇▇ if it would
have ever been considered a single employer with SSA or ▇▇▇▇▇▇ under ERISA
Section 4001(b) or part of the same "controlled group" as SSA or ▇▇▇▇▇▇ for
purposes of ERISA Section 302(d)(8)(C).
3.1 Financial Statements and Projections.
------------------------------------
(a) SSA and ▇▇▇▇▇▇ have provided Parent with the following financial
statements, copies of which are attached hereto as Schedule 3.13(a) (the
----------------
"Financial Statements"):
(i) Unaudited consolidated balance sheets of SSA and ▇▇▇▇▇▇ as
at December 31, 1996, December 31, 1995 and December 31, 1994 and unaudited
consolidated statements of income, retained earnings and cash flows for
each of the three (3) years then ended. The consolidated balance sheet of
SSA and ▇▇▇▇▇▇ as at December 31, 1995 is referred to hereinafter as the
"Base Balance Sheet."
(ii) A statement of the gross revenues and net revenues after
commission of each of SSA and ▇▇▇▇▇▇ for each of the last three (3) fiscal
years ended December 31.
(iii) An unaudited consolidated balance sheet of SSA and ▇▇▇▇▇▇
as at February 28, 1997, and statements of income, retained earnings and
cash flows for the period then ended, certified by the Presidents of each
of SSA and ▇▇▇▇▇▇ (the "Interim Financial Statements").
The Financial Statements for fiscal year 1996 and the Interim Financial
Statements have been prepared by SSA and ▇▇▇▇▇▇ and the Financial Statements for
the fiscal years 1995 and 1994 have been reviewed by Coopers & ▇▇▇▇▇▇▇, SSA's
and ▇▇▇▇▇▇'▇ independent certified public accountants. The Financial Statements
(i) have been prepared in accordance with generally accepted accounting
principles applied consistently during the periods covered thereby (except for
the absence of footnotes), (ii) are complete and correct in all material
respects except as set forth on Schedule 3.13(a) attached hereto and (iii)
----------------
present fairly in all material respects the financial
15
condition of SSA and ▇▇▇▇▇▇ at the dates of said statements and the results of
its operations for the periods covered thereby.
(b) Except as set forth on Schedule 3.13(b) attached hereto, as of
----------------
the date hereof, neither SSA nor ▇▇▇▇▇▇ has any liabilities of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
known or unknown (including without limitation, liabilities as guarantor or
otherwise with respect to obligations of others, liabilities for Taxes due or
then accrued or to become due, or contingent or potential liabilities relating
to activities of SSA or ▇▇▇▇▇▇ or the conduct of their respective businesses
prior to the date hereof regardless of whether claims in respect thereof have
been asserted), except liabilities stated or adequately reserved against on the
Base Balance Sheet, or reflected in Schedules furnished to Parent hereunder as
of the date hereof.
(c) Attached hereto as Schedule 3.13(c) are projected results of SSA
----------------
and ▇▇▇▇▇▇ on a consolidated basis for the fiscal year ending December 31, 1997
(the "Projections"). The Projections represent the Stockholder's good faith
estimates of the future performance of SSA and ▇▇▇▇▇▇ based upon assumptions
(all of which are set forth in Schedule 3.13(c)) which the Stockholder in good
----------------
faith believes are reasonable as of the date hereof.
3.14 Ordinary Course. Since the date of the Base Balance Sheet, each of
---------------
SSA and ▇▇▇▇▇▇ has conducted its business in the normal, usual and customary
manner in the ordinary and regular course of business, consistent with its prior
practices.
3.15 Absence of Certain Changes. Except as disclosed in Schedule 3.15
-------------------------- -------------
attached hereto and in the Financial Statements, since the date of the Base
Balance Sheet there has not been:
(a) Any change in the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of SSA or ▇▇▇▇▇▇, which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, could have a material adverse effect
on the business of SSA or ▇▇▇▇▇▇;
(b) Any amendment or termination or, to the knowledge of SSA, ▇▇▇▇▇▇
and the Stockholder, proposed or threatened amendment or termination, whether
written or oral, of any Contract (as defined in 3.16) or material Lease;
(c) Any contingent liability incurred by SSA or ▇▇▇▇▇▇ as guarantor
or otherwise with respect to the obligations of others;
(d) Any mortgage, encumbrance or lien placed on any of the properties
of SSA or ▇▇▇▇▇▇;
(e) Any cancellation of any material debt or claim owing to, or
waiver of a material right of, SSA or ▇▇▇▇▇▇;
16
(f) Any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation liabilities for Taxes due or to become due or
contingent or potential liabilities relating to products or services provided by
SSA or ▇▇▇▇▇▇ or the conduct of their respective businesses since the date of
the Base Balance Sheet regardless of whether claims in respect thereof have been
asserted), incurred by SSA or ▇▇▇▇▇▇ other than obligations and liabilities
incurred in the ordinary course of business (it being understood that product or
service liability claims shall not be deemed to be incurred in the ordinary
course of business);
(g) Any purchase, sale or other acquisition or disposition, or any
agreement or other arrangement for the purchase, sale or other acquisition or
disposition, of any of the properties or assets of another entity, SSA or
▇▇▇▇▇▇, other than in the ordinary course of business (including purchases of
new laundry machine inventory from dealers or manufacturers) and excluding any
purchases disclosed on Schedule 3.4 attached hereto;
------------
(h) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of SSA or ▇▇▇▇▇▇;
(i) Any declaration, setting aside or payment of any dividend by SSA
or ▇▇▇▇▇▇, or the making of any other distribution in respect of the capital
stock of SSA or ▇▇▇▇▇▇, or any direct or indirect redemption, purchase or other
acquisition by SSA or ▇▇▇▇▇▇ of its own capital stock;
(j) Any labor trouble or claim of unfair labor practices involving
SSA or ▇▇▇▇▇▇. Any change in the compensation payable or to become payable by
SSA or ▇▇▇▇▇▇ to any of its officers, employees, agents or independent
contractors other than normal merit increases in accordance with its usual
practices, or any bonus payment or arrangement made to or with any of such
officers, employees, agents or independent contractors;
(k) Any change with respect to the officers or management of SSA or
▇▇▇▇▇▇;
(l) Any payment or discharge of a material lien or liability of SSA
or ▇▇▇▇▇▇ which was not shown on the Base Balance Sheet or otherwise in the
ordinary course of business thereafter;
(m) Any obligation or liability incurred by SSA or ▇▇▇▇▇▇ to any of
its officers, directors, stockholders or employees, or any loans or advances
made by SSA or ▇▇▇▇▇▇ to any of its officers, directors, stockholders or
employees, except normal compensation and expense allowances payable to officers
or employees; or
(n) Any change in accounting methods or practices, credit practices
or collection policies used by SSA or ▇▇▇▇▇▇.
3.16 Contracts. Except for contracts, commitments, plans, agreements and
---------
licenses described in Schedule 3.16 attached hereto, true and complete copies of
-------------
which have been delivered
17
to Parent (and other than the Leases set forth on Schedule 3.8), neither SSA nor
------------
▇▇▇▇▇▇ is a party to or subject to:
(a) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union;
(b) any employment contract or contract for services which is not
terminable within thirty (30) days by SSA or ▇▇▇▇▇▇ without liability for any
penalty or severance payment;
(c) any contract or agreement for the purchase of any laundry machine
or other Equipment except purchase orders in the ordinary course not exceeding
$50,000 in the aggregate;
(d) any other contracts or agreements creating any obligations of SSA
or ▇▇▇▇▇▇ of $30,000 or more on an individual basis, or $50,000 or more on an
aggregate basis, with respect to any such contract or agreement not specifically
disclosed elsewhere under this Agreement;
(e) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier;
(f) any contract or agreement which by its terms does not terminate
or is not terminable without penalty by SSA or ▇▇▇▇▇▇ or its successors within
one (1) year after the date hereof;
(g) any contract or agreement for the sale or lease of its products
not made in the ordinary course of business;
(h) any contract or arrangement with any sales agent or distributor;
(i) any contract containing covenants limiting the freedom of SSA or
▇▇▇▇▇▇ to compete in any line of business or with any person or entity;
(j) any contract or agreement for the purchase of any fixed asset for
a price in excess of $50,000 whether or not such purchase is in the ordinary
course of business;
(k) any license agreement;
(l) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(m) any contract or agreement with any officer, employee, director of
SSA or ▇▇▇▇▇▇, the Stockholder or with any persons or organizations controlled
by or affiliated with any of them.
18
Neither SSA nor ▇▇▇▇▇▇ is in default under any such contracts, commitments,
plans, agreements or licenses described in said Schedule (individually a
"Contract" and collectively the "Contracts") and neither SSA nor ▇▇▇▇▇▇ has any
knowledge of conditions or facts which with notice or passage of time, or both,
would constitute a default, except where such a default could not reasonably be
expected to, individually or in the aggregate, have a material adverse effect on
the condition (financial or otherwise), properties, assets, liabilities,
business, operations or prospects of SSA or ▇▇▇▇▇▇. Each of the Contracts is
valid and in full force and effect, and will be enforceable by the SSA Surviving
Corporation or the ▇▇▇▇▇▇ Surviving Corporation, as the case may be, against the
other party thereto in accordance with its terms, except for any non-competition
provision or agreement limiting the freedom of any party thereto to compete in
any line of business or with any person or entity, the benefits of which run to
SSA or ▇▇▇▇▇▇, the enforceability of which may be limited by the principles
governing the availability of equitable remedies.
3.17 Insurance. The physical properties and assets of SSA and ▇▇▇▇▇▇ are
---------
insured to the extent disclosed in Schedule 3.17 attached hereto, and all such
-------------
insurance policies and arrangements are disclosed in said Schedule 3.17. Said
-------------
insurance policies and arrangements are in full force and effect, all premiums
with respect thereto are currently paid, and each of SSA and ▇▇▇▇▇▇ is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by SSA and ▇▇▇▇▇▇ and is
sufficient for compliance by each of SSA and ▇▇▇▇▇▇ with all requirements of law
and all agreements and Leases to which it is a party.
3.18 Approvals; Consents. Except as set forth on Schedule 3.18 attached
------------------- -------------
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by SSA or ▇▇▇▇▇▇ in connection with the execution and delivery of this
Agreement and the Company Documents or the consummation of the transactions
contemplated hereby and thereby.
3.19 Banking Relationships. Schedule 3.19 attached hereto contains a list
--------------------- -------------
of all the arrangements and accounts each of SSA and ▇▇▇▇▇▇ has with any banking
institution, trust company, savings and loan association or other financial
institution. Schedule 3.19 completely and accurately describes each such
-------------
arrangement, including with respect to the type of account and the persons
authorized to have access thereto. At the Closing, copies of all records,
including signature cards, will be in the possession of the SSA Surviving
Corporation or the ▇▇▇▇▇▇ Surviving Corporation, as the case may be.
3.20 Hazardous Materials. Except as permitted by or consistent with
-------------------
applicable Environmental Laws: (i) no Hazardous Material (as defined below) has
ever been generated, transported, used, stored, spilled, released or disposed of
by SSA or ▇▇▇▇▇▇ on or under any of the Real Property (as defined below); and
(ii) the operations of SSA and ▇▇▇▇▇▇ as currently conducted are, and the Real
Property is, to the knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder, in compliance
with all applicable Environmental Laws. For purpose of this Agreement, (A)
"Hazardous Materials" shall mean substances defined as "hazardous substances,"
"hazardous materials," "hazardous wastes" or "toxic substances" in the
Comprehensive Environmental
19
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S)
9601, et seq. ("CERCLA"), the Resource Conservation and Recovery Act, as
-- ---
amended, 42 U.S.C. (S) 6901, et seq. ("RCRA"), any analogous state and local
-- ---
laws, any substances defined as Hazardous Materials in the regulations adopted
and publications promulgated pursuant to said laws, asbestos and asbestos
containing material and petroleum products, including fuel oil, (B)
"Environmental Laws" means any law, statute, regulation or court order binding
upon SSA or ▇▇▇▇▇▇, consent decree binding upon SSA or ▇▇▇▇▇▇, or settlement
agreement to which SSA or ▇▇▇▇▇▇ is a party, which relates to Hazardous
Materials, including CERCLA and RCRA, their implementing regulations or any
other similar federal, state or local statutes or regulations and (C)"Real
Property" means all leaseholds and other interests of every kind in real
property owned or held by SSA or ▇▇▇▇▇▇.
3.21 Intellectual Property.
---------------------
(a) Except as described in Schedule 3.21 attached hereto, neither SSA
-------------
nor ▇▇▇▇▇▇ has ownership of, or license to use, any patent, copyright, trade
secret, trademark, or other proprietary rights (collectively, "Intellectual
Property"). To the knowledge of SSA, ▇▇▇▇▇▇ and Stockholder, all of the rights
of SSA and ▇▇▇▇▇▇ in such Intellectual Property are freely transferable. To the
knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder, there are no claims or demands of
any other person pertaining to any of such Intellectual Property and no
proceedings have been instituted, or are pending or threatened, which challenge
the rights of SSA or ▇▇▇▇▇▇ in respect thereof. To the knowledge of SSA, ▇▇▇▇▇▇
and the Stockholder, each of SSA and ▇▇▇▇▇▇ has the right to use, free and clear
of claims or rights of other persons, all customer lists, designs, manufacturing
or other processes, computer software, systems, data compilations, research
results and other information required for or incident to its products or its
business as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to SSA and ▇▇▇▇▇▇ or used or to be used by SSA or ▇▇▇▇▇▇ in its
businesses as presently conducted or contemplated, and all other items of
Intellectual Property which are material to the business or operations of SSA or
▇▇▇▇▇▇, are listed in Schedule 3.21 attached hereto.
-------------
(c) To the knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder, the present
and contemplated business, activities and products of SSA and ▇▇▇▇▇▇ do not
infringe any Intellectual Property of any other person. No proceeding charging
SSA or ▇▇▇▇▇▇ with infringement of any adversely held Intellectual Property has
been filed or, to the knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder, is
threatened to be filed. To the knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder,
neither SSA nor ▇▇▇▇▇▇ is making unauthorized use of any confidential
information or trade secrets of any person, including without limitation, any
former employer of any past or present employee of SSA or ▇▇▇▇▇▇. Except as set
forth in Schedule 3.21 attached hereto, neither SSA or ▇▇▇▇▇▇ nor, to the
-------------
knowledge of SSA, ▇▇▇▇▇▇ and the Stockholder, any of its employees have any
agreements or arrangements with any persons other than SSA and ▇▇▇▇▇▇ related to
confidential information or trade secrets of such persons or restricting any
such employee's ability to engage in
20
business activities of any nature. The activities of its employees on behalf of
each of SSA and ▇▇▇▇▇▇ do not violate any such agreements or arrangements known
to SSA or ▇▇▇▇▇▇.
3.22 Books and Records. The minute and stock record books of SSA and
-----------------
▇▇▇▇▇▇ have been made available to ▇▇▇-▇▇▇▇ and Parent and their representatives
and are substantially complete and are correct in all material respects. At the
Closing, all of such books and records will be in the possession of the Parent.
3.23 Transactions with Interested Persons. Except as set forth in
------------------------------------
Schedule 3.23 attached hereto, neither SSA, ▇▇▇▇▇▇, the Stockholder, any
-------------
officer, supervisory employee or director of SSA or ▇▇▇▇▇▇ or, to the knowledge
of SSA, ▇▇▇▇▇▇ and the Stockholder, any of their respective spouses or family
members, owns directly or indirectly on an individual or joint basis any
material interest in, or serves as an officer or director or in another similar
capacity of, any competitor or supplier of SSA or ▇▇▇▇▇▇ or any other
organization which has a material contract or arrangement with SSA or ▇▇▇▇▇▇.
3.24 No Brokers. Neither the Stockholder, SSA nor ▇▇▇▇▇▇ has employed any
----------
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement or any other document contemplated hereby.
3.25 Disclosure. The representations, warranties and statements contained
----------
in this Agreement and in the Exhibits and Schedules delivered by SSA, ▇▇▇▇▇▇ and
the Stockholder to Parent, ▇▇▇-▇▇▇▇ and Sub pursuant to this Agreement do not
contain any untrue statement of a material fact, and, when taken together, do
not omit to state a material fact required to be stated therein or necessary in
order to make such representations, warranties or statements not misleading in
light of the circumstances under which they were made.
3.26 Commission Payments. Schedule 3.26 attached hereto lists each
------------------- -------------
obligation or commitment of SSA or ▇▇▇▇▇▇ to make guaranteed commission or
similar payments under any Lease or Contract, including the Lease or Contract
which requires each such payment, the due date of each such payment and the
amount of each such payment.
3.27 Labor Matters. Neither SSA, ▇▇▇▇▇▇ nor Stockholder is a party to any
-------------
collective bargaining or similar agreement on the date hereof and has complied
in all material respects with all applicable state and federal laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours and other laws related to employment of employees by SSA, ▇▇▇▇▇▇ or
Stockholder or their respective agents, and there are no arrears in the payment
of wages, withholding of social security taxes, unemployment insurance premiums
or other similar obligations of SSA, ▇▇▇▇▇▇ or Stockholder other than in the
ordinary course of business.
3.28 Blue Eagle Leases. Neither SSA nor ▇▇▇▇▇▇ is a party to any Lease
-----------------
that is a Blue Eagle Lease ("Blue Eagle Lease"), as that term is defined in the
Agreement between the State of Florida and SSA, dated as of April 27, 1994 (the
"Blue Eagle Agreement"). SSA and Stockholder are in compliance, and have
complied, with all of the terms and conditions of the Blue Eagle Agreement and
have performed all of their respective obligations under the Blue Eagle
Agreement.
21
SSA and Stockholder as of the date of this Agreement have no continuing or
future obligations under the Blue Eagle Agreement. Neither SSA, ▇▇▇▇▇▇ nor the
Stockholder have entered into any leases since the date of the Blue Eagle
Agreement that would violate or conflict with the Blue Eagle Agreement.
SECTION 4. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
4.1 Investment Representations. The Stockholder hereby represents and
--------------------------
warrants to and agrees with Parent as follows, and the Stockholder acknowledges
that Parent intends to rely on such representations, warranties and agreements
in connection with the transactions contemplated by this Agreement:
(a) All of the shares of Parent Common Stock to be acquired by the
Stockholder hereunder (the "Parent Shares") will be acquired for investment for
the Stockholder's own account, not as a nominee or agent, and not with a present
view toward distribution of any part thereof, and the Stockholder has no present
intention of selling, granting participation in, or otherwise distributing such
Parent Shares.
(b) The Stockholder acknowledges and understands that the Parent
Shares will not be registered under the Securities Act in reliance on an
exemption from registration under the Securities Act, and that the reliance by
Parent on such exemption is predicated on the representations of the Stockholder
set forth herein.
(c) The Stockholder understands that the Parent Shares may not be
sold, transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Parent Shares or an available
exemption from registration under the Securities Act, the Parent Shares must be
held indefinitely. The Stockholder is aware that current information about
Parent is not now publicly available. The Stockholder agrees that, in addition
to any other applicable limitations on the transfer of the Parent Shares, in no
event will he make a transfer, pledge or other disposition of any of the Parent
Shares other than pursuant to an effective registration statement under the
Securities Act, unless and until (i) the Stockholder shall have notified Parent
of the proposed disposition and shall have furnished to Parent a statement of
the circumstances surrounding the disposition, and (ii) at the expense of the
Stockholder or his transferee, the Stockholder shall have furnished to Parent an
opinion of counsel reasonably satisfactory to Parent to the effect that such
transfer, pledge or other disposition may be made without registration under the
Securities Act.
(d) The Stockholder (i) by reason of his business and financial
experience, has such knowledge, sophistication and experience in business and
financial matters as to be capable of evaluating the merits and risks of his
investment in the Parent Shares, and (ii) believes his financial condition and
investments are such that he is able to bear the economic risk of a complete
loss of the Parent Shares. The Stockholder has consulted with his own advisers
with respect to his proposed investment in Parent. The Stockholder represents
and warrants that he has had the opportunity to ask questions and to receive
answers from Parent concerning the financial
22
condition, operations and prospects of Parent and the terms and conditions of
the Stockholder's investment, as well as the opportunity to obtain any
additional information necessary to verify the accuracy of information furnished
in connection therewith that Parent possesses or can acquire without
unreasonable effort or expense.
(e) The Stockholder is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act.
(f) The Stockholder's legal domicile for purposes of the applicable
securities laws is the State of Florida.
(g) The Stockholder agrees that any certificate(s) representing the
Parent Shares shall carry substantially the legends set forth in Section 8.12 of
the Stockholder's Agreement (as defined below).
4.2 Agreements. The Stockholder is not a party to any non-competition,
----------
trade secret or confidentiality agreement with any party other than SSA or
▇▇▇▇▇▇. There are no agreements or arrangements not contained herein or
disclosed in a Schedule hereto, to which such Stockholder is a party relating to
the business of SSA or ▇▇▇▇▇▇ or to such Stockholder's rights and obligations as
a stockholder, director, officer or employee of SSA or ▇▇▇▇▇▇. The Stockholder
does not own, directly or indirectly, on an individual or joint basis, any
interest (excluding passive investments in the shares of any enterprise which
are publicly traded, provided his or her holdings therein, together with any
holdings of his or her Affiliates and family members, do not exceed one percent
(1%) of the outstanding shares of comparable interest in such entity) in, or
serve as an officer or director of, any organization which has a contract or
arrangement with SSA or ▇▇▇▇▇▇ or which is a direct or indirect competitor of
SSA or ▇▇▇▇▇▇.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF PARENT, MAC-GRAY AND SUB.
5.1 For the purposes of this Section 5, references to the "knowledge" or
the "best knowledge" of Parent, Mac-Gray and/or Sub shall mean the collective
actual knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇. As a material inducement to SSA, ▇▇▇▇▇▇ and the Stockholder to enter
into this Agreement and consummate the transactions contemplated hereby, Parent,
Mac-Gray (which term, for purposes of this Section 5, shall also include the
Partnership as if the Partnership Merger had occurred as of the effectiveness of
this Agreement) and Sub each hereby represents and warrants to SSA, ▇▇▇▇▇▇ and
the Stockholder as follows:
5.2 Organization. Each of Parent, Mac-Gray and Sub is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to conduct its business as it
is now conducted and to own, lease and operate its properties and assets. The
copies of Parent's, ▇▇▇-▇▇▇▇'▇ and Sub's respective Certificate of
Incorporation, each as amended to date, and of Parent's, ▇▇▇-▇▇▇▇'▇ and Sub's
respective
23
by-laws, each as amended to date, heretofore delivered to SSA, ▇▇▇▇▇▇ and the
Stockholder, or their counsel, are complete and correct and no amendments
thereto are pending. None of Parent, Mac-Gray and Sub is in violation of any
term of its respective Certificate of Incorporation or by-laws. Each of Parent,
Mac-Gray and Sub is duly qualified to do business as a foreign corporation under
the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties and assets requires such qualification,
except where the absence of such qualification could not reasonably be expected
to, individually, or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), property, assets, liabilities, prospects,
business or operation of Parent, Mac-Gray or Sub.
5.3 Capital Stock; Beneficial Ownership.
-----------------------------------
(a) As of the date hereof and immediately prior to the Closing, the
authorized capital stock of Parent consists of 35,000,000 shares of capital
stock, of which (i) 30,000,000 shares are common stock, $.01 par value per
share, none of which shares are issued and outstanding and 750,000 of which
shares are reserved for issuance under Parent's 1997 Stock Option and Incentive
Plan and (ii) 5,000,000 shares are preferred stock, $.01 par value per share,
none of which shares are issued and outstanding. Except as set forth on
Schedule 5.3(a)(i) attached hereto, there are no outstanding options, warrants,
------------------
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any additional
shares of capital stock of any class of Parent. None of Parent's capital stock
has been issued in violation of any federal or state law. Except as set forth
on Schedule 5.3(a)(i) attached hereto, there are no voting trusts, voting
------------------
agreements, proxies or other agreements, instruments or undertakings with
respect to the voting of capital stock of Parent. Upon the Closing, and after
giving effect to the Mac-Gray Exchanges and the Mergers, the capitalization of
Parent shall be as set forth on Schedule 5.3(a)(ii) attached hereto.
-------------------
(b) The authorized capital stock of Mac-Gray consists of 200,000
shares of common stock, $1.00 par value per share, of which 100,000 shares are
duly and validly issued, outstanding, fully-paid and non-assessable. Schedule
--------
5.3(b) attached hereto lists the beneficial and record owners of the capital
------
stock of Mac-Gray immediately prior to the Closing. At the Closing, all of the
issued and outstanding shares of Mac-Gray common stock will be exchanged for
shares of Parent Common Stock pursuant to the Stock Exchange, and Parent will
own beneficially and of record all of the issued and outstanding shares of
capital stock of Mac-Gray, free and clear of any Liens, except for a pledge of
all of such shares to the lenders under Parent's credit facility.
(c) The authorized capital stock of Sub consists of 3,000 shares of
Sub Common Stock, $.01 par value per share, of which 1,000 shares are duly and
validly issued, outstanding, fully-paid and non-assessable. Parent is the
beneficial and record owner of all of the capital stock of Sub. At the Closing,
all of the shares of Sub Common Stock shall be converted into shares of the
common stock of ▇▇▇▇▇▇ Surviving Corporation in accordance with Section 2.2
hereof.
5.4 Subsidiaries.
------------
24
(a) Other than Sub and Sun Services of America, Inc., a Delaware
corporation ("Sub II"), Parent has no direct subsidiaries or investments in any
other corporation or business organization. At the Closing, and after giving
effect to the Mergers and the Mac-Gray Exchanges, Parent will own beneficially
and of record (i) all of the outstanding shares of capital stock of the ▇▇▇▇▇▇
Surviving Corporation, (ii) all of the outstanding shares of capital stock of
Sub II, and (iii) all of the outstanding shares of capital stock of Mac-Gray,
free and clear of any Liens, except for a pledge of all of such shares to the
lenders under Parent's credit facility.
(b) Except as set forth on Schedule 5.4(b) attached hereto, Mac-Gray
---------------
has no subsidiaries or investments in any corporation or business organization.
Mac-Gray owns all of such interests described in Schedule 5.4(b) attached hereto
---------------
free and clear of any Liens.
(c) Neither Sub nor Sub II has any subsidiaries or investments in any
other corporation or business organization.
5.5 Required Action; Authority. All actions and proceedings necessary to
--------------------------
be taken by or on the part of each of Parent, Mac-Gray and Sub in connection
with the transactions contemplated by this Agreement have been duly and validly
taken, and this Agreement has been duly and validly authorized, executed and
delivered by each of Parent, Mac-Gray and Sub. Each of Parent, Mac-Gray and Sub
has full right, authority and power to execute and deliver this Agreement and
each agreement, document and instrument to be executed and delivered by or on
behalf of it pursuant to, or as contemplated by this Agreement (collectively,
the "Mac-Gray Documents") and to carry out the transactions contemplated hereby
and thereby. This Agreement and each other Mac-Gray Document constitutes, or
when executed and delivered will constitute, the legal, valid and binding
obligations of Parent, Mac-Gray and/or Sub, as applicable, enforceable against
Parent, Mac-Gray and/or Sub, as applicable, in accordance with its respective
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium, or other similar laws from time to time
in effect affecting creditor's rights generally or by principles governing the
availability of equitable remedies.
5.6 No Conflicts. The execution, delivery and performance by each of
------------
Parent, Mac-Gray and Sub of this Agreement and each other Mac-Gray Document to
which such entity is a party does not and will not with or without the giving of
notice or the lapse of time or both, (a) violate any provision of the respective
Certificate of Incorporation of Parent, Mac-Gray and Sub, as amended to date,
(b) constitute a violation of, or conflict with or result in any breach of,
acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which any of Parent, Mac-Gray and Sub is a
party or by which they are bound, (c) to the knowledge of Parent, Mac-Gray or
Sub violate any judgment, decree, order, statute, law, rule or regulation
applicable to Parent, Mac-Gray and Sub or (d) require any of Parent, Mac-Gray
and Sub to obtain any approval, consent or waiver of, or to make any filing
with, any person or entity (governmental or otherwise) that has not been
obtained or made or (e) result in the creation or imposition of any Lien on any
of property or assets of Parent, Mac-Gray or Sub. Each of the officers who
execute this Agreement and the other Mac-Gray Documents on behalf of Parent,
Mac-Gray and Sub have all requisite power to do so in the name of and on behalf
of such entity.
25
5.7 No Litigation; Compliance. Neither Parent, Mac-Gray or Sub is now
-------------------------
involved in nor, to the knowledge of Parent, Mac-Gray and Sub, is threatened to
be involved in, any litigation or legal or other proceedings, other than
proceedings that could not reasonably be expected to have a material adverse
effect upon the business, operations or financial condition of Parent, Mac-Gray
and Sub. To the knowledge of Parent, Mac-Gray and Sub, each of Parent, Mac-Gray
and Sub is in compliance with all laws and governmental (federal, state and
local) rules and regulations applicable to each such entity and each such
entities' business. Neither Parent, Mac-Gray or Sub has been charged nor, to
the knowledge of Parent, Mac-Gray and Sub, is threatened to be charged with any
violation of any provision of any federal, state or local law or administrative
rule or regulation relating to its business. Each of Parent, Mac-Gray and Sub
has at all times possessed and currently possesses and has been and is in
compliance with all governmental permits, licenses and authorizations necessary
for the conduct of its business. All of such permits, licenses and
authorizations are valid and in full force and effect.
5.8 Financial Statements. Attached hereto as Schedule 5.8 are copies of
-------------------- ------------
the unaudited combined balance sheets of Mac-Gray as at December 31, 1996 and
December 31, 1995, and unaudited combined statements of operations,
stockholders' equity and cash flows for each of the three (3) years ended
December 31, 1996, 1995 and 1994 (collectively the "Mac-Gray Financial
Statements"). The Mac-Gray Financial Statements (i) have been prepared by Mac-
Gray in accordance with generally accepted accounting principles applied
consistently during the periods covered thereby, (ii) are complete and correct
in all material respects and (iii) present fairly in all material respects the
financial condition of Mac-Gray at the dates of said statements and the results
of its operations for the periods covered thereby. Except as set forth in
Schedule 5.8 attached hereto, as of the date hereof Mac-Gray has no liabilities
------------
of any nature, whether accrued, absolute, contingent or otherwise, asserted or
unasserted, known or unknown (including without limitation, liabilities as
guarantor or otherwise with respect to obligations of others, liabilities for
Taxes due or then accrued or to become due, or contingent or potential
liabilities relating to activities of Mac-Gray or the conduct of its business
prior to the date hereof regardless of whether claims in respect thereof have
been asserted), except as disclosed in the Mac-Gray Financial Statements or in
any notes thereto, that could materially adversely affect the business,
operations or financial condition of Mac-Gray. Since December 31, 1996, there
has not been a material adverse change in the business, operations or financial
condition of Mac-Gray.
5.9 Taxes.
-----
(a) Each of Parent, Mac-Gray and Sub has paid or caused to be paid all
Taxes required to be paid by it through the date hereof whether disputed or not.
(b) Each of Parent, Mac-Gray and Sub has in accordance with applicable
law filed all federal, state, local and foreign tax returns required to be filed
by it through the date hereof, and all such returns correctly and accurately set
forth the amount of any Taxes relating to the applicable period. No federal,
state, local or foreign income tax return filed with respect to Parent, Mac-Gray
or Sub for any taxable period ended on or after December 31, 1991 has been
audited or is currently the subject of an audit. No extension of time with
respect to any date on which a tax return was or is to be filed by Parent, Mac-
Gray or Sub is in force, and no waiver or
26
agreement by Parent, Mac-Gray or Sub is in force for the extension of time for
the assessment or payment of any Taxes.
(c) Neither the IRS nor any other governmental authority is now
asserting or, to the knowledge of Mac-Gray, threatening to assert against
Parent, Mac-Gray or Sub any deficiency or claim for additional Taxes. No claim
has ever been made by an authority in a jurisdiction where Parent, Mac-Gray or
Sub does not file reports and returns that Parent, Mac-Gray or Sub is or may be
subject to taxation by that jurisdiction. There are no security interests on
any of the assets of Parent, Mac-Gray and Sub that arose in connection with any
failure (or alleged failure) to pay any Taxes. None of Parent, Mac-Gray or Sub
has entered into a closing agreement pursuant to Section 7121 of the Code.
(d) None of Parent, Mac-Gray or Sub has ever been (or has ever had any
liability for unpaid Taxes because it once was) a member of an "affiliated
group" (as defined in Section 1504(a) of the Code). Except as set forth in
Schedule 5.9 attached hereto, none of Parent, Mac-Gray or Sub has ever filed,
------------
and has never been required to file, a consolidated, combined or unitary tax
return with any other entity. Except as set forth in Schedule 5.9, none of
------------
Parent, Mac-Gray or Sub owns and has never owned a direct or indirect interest
in any trust, partnership, corporation or other entity. Except as set forth in
Schedule 5.9 attached hereto, none of Parent, Mac-Gray or Sub is a party to any
------------
tax sharing agreement.
(e) For purposes of this Agreement, all references to Sections of the
Code shall include any predecessor provisions to such Sections and any similar
provisions of federal, state, local or foreign law.
(f) It is the present intention of Parent to continue at least one
significant historic business line of SSA, or to use at least a significant
portion of SSA's historic business assets in a business, in each case within the
meaning of Treasury Regulation (S)1.368-1(d).
(g) It is the present intention of Parent to continue at least one
significant historic business line of ▇▇▇▇▇▇, or to use at least a significant
portion of ▇▇▇▇▇▇'▇ historic business assets in a business, in each case within
the meaning of Treasury Regulation (S)1.368-1(d).
(h) Parent has no present plan or intention to transfer any of the
assets received from SSA in such a manner that the transfer would cause the
reorganization to be treated as other than a tax free reorganization under
(S)368 of the Code.
(i) Parent has no present plan or intention to cause ▇▇▇▇▇▇ to
transfer any of the assets of ▇▇▇▇▇▇ in such a manner that the transfer would
cause the reorganization to be treated as other than a tax free reorganization
under (S)368 of the Code.
(j) Parent has no present plan or intention to make a QSSS election,
as permitted under (S)1361 of the Code, with respect to ▇▇▇▇▇▇.
27
5.10 Leases. All of the material contracts, understandings and
------
arrangements, whether written or oral, including any tenancy at will, under
which Mac-Gray is bound or to which Mac-Gray is a party which relate to the
placement of the laundry machines (the "Mac-Gray Leases") is valid, in full
force and effect and binding upon Mac-Gray and the other parties thereto in
accordance with its respective terms. Neither Mac-Gray nor, to the knowledge
of Mac-Gray, any other party is in default under or in arrears in the
performance, payment or satisfaction of any agreement or condition on its part
to be performed or satisfied under any Mac-Gray Lease, nor, to the knowledge of
Mac-Gray, does any condition exist that with notice or lapse of time or both
would constitute such a default, and no waiver or indulgence has been granted by
any landlord under any Mac-Gray Lease. Mac-Gray has not received notice and has
no knowledge of any fact which would result in the termination, repudiation or
breach of any Mac-Gray Lease. Mac-Gray has obtained the consent and approvals
of all other parties to each Mac-Gray Lease that requires such consent or
approval in connection with the consummation of the transactions contemplated by
the Mergers.
5.11 Assets; Title.
-------------
(a) Except as set forth on Schedule 5.11 attached hereto, each of
-------------
Parent, Mac-Gray and Sub has good and valid title to, or a valid leasehold
interest in, all of such entities' assets and other properties which are
material to its financial condition, free and clear of all Liens.
(b) Schedule 5.11 attached hereto sets forth a list of all real
-------------
property owned by Parent, Mac-Gray and Sub and any real property in which
Parent, Mac-Gray or Sub holds a leasehold interest, other than the Mac-Gray
Leases. No party to any such lease has given notice to Parent, Mac-Gray or Sub
or made any claim with respect to any breach or default with respect to any such
lease. Parent, Mac-Gray and Sub have not granted to any other person or entity
the right to the use, occupancy or enjoyment of such lease.
5.12 Employee Benefit Programs.
-------------------------
(a) Schedule 5.12(a) attached hereto lists every Employee Program (as
----------------
defined below) that has been maintained (as defined below) by Mac-Gray at any
time during the three-year period ending on the Closing Date.
(b) Except as set forth on Schedule 5.12(b) attached hereto, each
----------------
Employee Program which has ever been maintained by Mac-Gray and which has at any
time been intended to qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the IRS regarding its
qualification under such section and has, in fact, been qualified under the
applicable section of the Code from the effective date of such Employee Program
through and including the Closing (or, if earlier, the date that all of such
Employee Program's assets were distributed). No event or omission has occurred
which would cause any such Employee Program to lose its qualification under the
applicable Code section.
28
(c) Mac-Gray does not know and has no reason to know, of any failure
of any party to comply with any laws applicable to the Employee Programs that
have been maintained by Mac-Gray. With respect to any Employee Program ever
maintained by Mac-Gray, there has occurred no "prohibited transaction," as
defined in Section 406 of ERISA or Section 4975 of the Code, or breach of any
duty under ERISA or other applicable law (including, without limitation, any
health care continuation requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan), which could
result, directly or indirectly, in any taxes, penalties or other liability to
Mac-Gray. No litigation, arbitration, or governmental administrative proceeding
(or investigation) or other proceeding (other than those relating to routine
claims for benefits) is pending or threatened with respect to any such Employee
Program.
(d) Neither Mac-Gray nor any Affiliate (as defined below) (i) has ever
maintained any Employee Program which has been subject to title IV of ERISA
(including, but not limited to, any Multiemployer Plan (as defined below)) or
(ii) has ever provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA) or has ever promised to provide such post-
termination benefits.
(e) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(4)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA, and (B) all stock option plans, bonus or incentive
award plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in (A)
above. In the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee
Program shall include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii) An entity is an "Affiliate" of Mac-Gray if it would have
ever been considered a single employer with the Company under ERISA Section
4001(b) or part of the same "controlled group" as the Company for purposes
of ERISA Section 302(d)(8)(C).
29
5.13 Ordinary Course. Since December 31, 1996, Mac-Gray has conducted
---------------
business in the normal, usual and customary manner in the ordinary and regular
course of business, consistent with its prior practices.
5.14 Absence of Certain Changes. Except as disclosed in Schedule 5.14
-------------------------- -------------
attached hereto and the Mac-Gray Financial Statements, since December 31, 1996,
there has not been:
(a) Any change in the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of Parent, Mac-Gray or
Sub, which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, could have a material
adverse effect on the business of such entity;
(b) Any amendment or termination or, to the knowledge of Mac-Gray,
proposed or threatened amendment or termination, whether written or oral, of any
material ▇▇▇-▇▇▇▇ Lease or Material ▇▇▇-▇▇▇▇ Contract (as defined in 5.15);
(c) Any contingent liability incurred by Parent, Mac-Gray or Sub as
guarantor or otherwise with respect to the obligations of others;
(d) Any mortgage, encumbrance or lien placed on any of the properties
of Parent, Mac-Gray or Sub;
(e) Any cancellation of any material debt or claim owing to, or waiver
of a material right of, Parent, Mac-Gray or Sub;
(f) Any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation liabilities for Taxes due or to become due or
contingent or potential liabilities relating to products or services provided by
Parent, Mac-Gray and Sub or the conduct of the business of Parent, Mac-Gray and
Sub since December 31, 1996, regardless of whether claims in respect thereof
have been asserted), incurred by Parent, Mac-Gray or Sub other than obligations
and liabilities incurred in the ordinary course of business (it being understood
that product or service liability claims shall not be deemed to be incurred in
the ordinary course of business);
(g) Any purchase, sale or other acquisition or disposition, or any
agreement or other arrangement for the purchase, sale or other acquisition or
disposition, of any of the properties or assets of another entity or Parent,
Mac-Gray or Sub, other than in the ordinary course of business;
(h) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of Parent, Mac-Gray or Sub;
(i) Any declaration, setting aside or payment of any dividend by
Parent, Mac-Gray or Sub, or the making of any other distribution in respect of
the capital stock of Parent, Mac-
30
▇▇▇▇ or Sub, or any direct or indirect redemption, purchase or other acquisition
by Parent, Mac-Gray or Sub of its own capital stock;
(j) Any labor trouble or claim of unfair labor practices involving
Parent, Mac-Gray or Sub. Any change in the compensation payable or to become
payable by Parent, Mac-Gray or Sub to any of its officers, employees, agents or
independent contractors, or any bonus payment or arrangement made to or with any
of such officers, employees, agents or independent contractors, in each case
except in the ordinary course of business;
(k) Any change with respect to the officers or management of Parent,
Mac-Gray or Sub;
(l) Any payment or discharge of a material lien or liability of
Parent, Mac-Gray or Sub which was not shown on the Mac-Gray Financial Statements
as of December 31, 1996, or otherwise in the ordinary course of business
thereafter;
(m) Any obligation or liability incurred by Parent, Mac-Gray or Sub to
any of its officers, directors, stockholders or employees, or any loans or
advances made by Parent, Mac-Gray or Sub to any of its officers, directors,
stockholders or employees, except normal compensation and expense allowances
payable to officers or employees; or
(n) Any change in accounting methods or practices, credit practices or
collection policies used by Mac-Gray.
5.15 Contracts. Except as set forth on Schedule 5.15 attached hereto, Mac-
--------- -------------
▇▇▇▇ is not a party to (a) any individual contract which obligates Mac-Gray for
more than $200,000 on an annual basis or (b) any contract, commitment, plan,
agreement or license which is material to the business or financial condition of
Parent, Mac-Gray and Sub taken as a whole (individually a "Material ▇▇▇-▇▇▇▇
Contract" and collectively the "Material ▇▇▇-▇▇▇▇ Contracts"). Each Material
▇▇▇-▇▇▇▇ Contract is valid, in full force and effect and enforceable against the
parties thereto in accordance with its terms, except for any non-competition
provision or agreement limiting the freedom of any party thereto to compete in
any line of business or with any person or entity, the benefits of which run to
Mac-Gray, the enforceability of which may be limited by the principles governing
the availability of equitable remedies. Neither Parent, Mac-Gray nor Sub is in
default under any such Material ▇▇▇-▇▇▇▇ Contract or has any knowledge of
conditions or facts which with notice or passage of time, or both, would
constitute a default, except where such a default could not reasonably be
expected to, individually or in the aggregate, have a material adverse effect on
the condition (financial or otherwise), properties, assets, liabilities,
business, operations or prospects of Parent, Mac-Gray and Sub.
5.16 Insurance. The physical properties and assets of Parent, Mac-Gray and
---------
Sub are insured to the extent disclosed in Schedule 5.16 attached hereto, and
-------------
all such insurance policies and arrangements are disclosed in said Schedule
--------
5.16. Said insurance policies and arrangements are in full force and effect,
----
all premiums with respect thereto are currently paid, and Parent, Mac-Gray and
Sub, as applicable, is in compliance in all material respects with the terms
thereof. Said
31
insurance is adequate and customary for the business engaged in by Parent, Mac-
Gray and Sub, as applicable, and is sufficient for compliance by such entity
with all requirements of law and all agreements to which such entity is a party.
5.17 Approvals; Consents. Except as set forth on Schedule 5.17 attached
------------------- -------------
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by any of Parent, ▇▇▇-▇▇▇▇ or Sub in connection with the execution and
delivery of this Agreement and the ▇▇▇-▇▇▇▇ Documents or the consummation of the
transactions contemplated hereby and thereby.
5.18 Hazardous Materials. Except as permitted by or consistent with
-------------------
applicable Environmental Laws: (i) no Hazardous Material (as defined below) has
ever been generated, transported, used, stored, spilled, released or disposed of
by ▇▇▇-▇▇▇▇ on or under any of the Real Property (as defined below); and (ii)
the operations of ▇▇▇-▇▇▇▇ as currently conducted are, and the Real Property is,
to the knowledge of ▇▇▇-▇▇▇▇, in compliance with all applicable Environmental
Laws. For purpose of this Agreement, (A) "Hazardous Materials" shall mean
substances defined as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601, et seq.
-- ---
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
(S) 6901, et seq. ("RCRA"), any analogous state and local laws, any substances
-- ---
defined as Hazardous Materials in the regulations adopted and publications
promulgated pursuant to said laws, asbestos and asbestos containing material and
petroleum products, including fuel oil, (B) "Environmental Laws" means any law,
statute, regulation or court order binding upon ▇▇▇-▇▇▇▇, consent decree binding
upon ▇▇▇-▇▇▇▇ or settlement agreement to which ▇▇▇-▇▇▇▇ is a party, which
relates to Hazardous Materials, including CERCLA and RCRA, their implementing
regulations or any other similar federal, state or local statutes or regulations
and (C) "Real Property" means all leaseholds and other interests of every kind
in real property owned or held by Parent, ▇▇▇-▇▇▇▇ or Sub.
5.19 Transactions with Interested Persons. Except as set forth in Schedule
------------------------------------ --------
5.19 attached hereto, neither ▇▇▇-▇▇▇▇ nor any officer, supervisory employee or
----
director of ▇▇▇-▇▇▇▇, to the knowledge of ▇▇▇-▇▇▇▇, any of their respective
spouses or family members, owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor or supplier of ▇▇▇-▇▇▇▇ or any other
organization which has a material contract or arrangement with ▇▇▇-▇▇▇▇.
5.20 No Brokers. None of Parent, ▇▇▇-▇▇▇▇ or Sub has employed any broker
----------
or finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this Agreement
or any other document contemplated hereby.
5.21 Disclosure. The representations, warranties and statements contained
----------
in this Agreement and in the Exhibits and Schedules delivered by Parent, ▇▇▇-
▇▇▇▇ and Sub to SSA, ▇▇▇▇▇▇ and the Stockholder pursuant to this Agreement do
not contain any untrue statement of a material fact, and, when taken together,
do not omit to state a material fact required to be stated
32
therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they were
made.
5.22 Books and Records. The minute and stock books of ▇▇▇-▇▇▇▇ have been
-----------------
made available to SSA and ▇▇▇▇▇▇ and their respective representatives and are
substantially complete and are correct in all material respects.
5.23 Intellectual Property.
---------------------
(a) Except as described in Schedule 5.23(a) attached hereto, ▇▇▇-▇▇▇▇
----------------
does not have ownership of, or license to use, any patent, copyright, trade
secret, trademark, or other proprietary rights that are material to the
condition (financial or otherwise) or business of ▇▇▇-▇▇▇▇ (collectively, "▇▇▇-
▇▇▇▇ Intellectual Property"). To the knowledge of ▇▇▇-▇▇▇▇, all of the rights
of ▇▇▇-▇▇▇▇ in such ▇▇▇-▇▇▇▇ Intellectual Property are freely transferable. To
the knowledge of ▇▇▇-▇▇▇▇, there are no claims or demands of any other person
pertaining to any of such ▇▇▇-▇▇▇▇ Intellectual Property and no proceedings have
been instituted, or are pending or threatened, which challenge the rights of
▇▇▇-▇▇▇▇ in respect thereof. To the knowledge of ▇▇▇-▇▇▇▇, ▇▇▇-▇▇▇▇ has the
right to use, free and clear of claims or rights of other persons, all customer
lists, designs, manufacturing or other processes, computer software, systems,
data compilations, research results and other information required for or
incident to its products or its business as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to ▇▇▇-▇▇▇▇ or used or to be used by ▇▇▇-▇▇▇▇ in its businesses as
presently conducted or contemplated, and all other items of ▇▇▇-▇▇▇▇
Intellectual Property which are material to the business or operations of ▇▇▇-
▇▇▇▇, are listed in Schedule 5.23(b) attached hereto.
----------------
(c) To the knowledge of ▇▇▇-▇▇▇▇, the present and contemplated
business, activities and products of ▇▇▇-▇▇▇▇ do not infringe any Intellectual
Property of any other person. No proceeding charging ▇▇▇-▇▇▇▇ with infringement
of any adversely held Intellectual Property has been filed or, to the knowledge
of ▇▇▇-▇▇▇▇, is threatened to be filed. To the knowledge of ▇▇▇-▇▇▇▇, ▇▇▇-▇▇▇▇
is not making unauthorized use of any confidential information or trade secrets
of any person, including without limitation, any former employer of any past or
present employee of ▇▇▇-▇▇▇▇. Except as set forth in Schedule 5.23 attached
-------------
hereto, neither ▇▇▇-▇▇▇▇ nor, to the knowledge of ▇▇▇-▇▇▇▇, any of its employees
have any agreements or arrangements with any persons other than ▇▇▇-▇▇▇▇ related
to confidential information or trade secrets of such persons or restricting any
such employee's ability to engage in business activities of any nature. The
activities of its employees on behalf of ▇▇▇-▇▇▇▇ do not violate any such
agreements or arrangements known to ▇▇▇-▇▇▇▇.
5.24 Labor Matters. Neither Parent, ▇▇▇-▇▇▇▇ nor Sub is a party to any
-------------
collective bargaining or similar agreement on the date hereof and has complied
in all material respects with all applicable state and federal laws respecting
employment and employment practices, terms and conditions of wages and hours and
other laws related to employment of employees by Parent,
33
▇▇▇-▇▇▇▇ or Sub or their respective agents, and there are no arrears in the
payment of wages, withholding of Social Security taxes, unemployment insurance
premiums or other similar obligations of Parent, ▇▇▇-▇▇▇▇ and Sub other than in
the ordinary course of business.
SECTION 6. DELIVERIES AT THE CLOSING.
The obligation of the parties to close the transactions contemplated by
this Agreement is subject to the delivery and satisfaction at the Closing of the
following:
6.1 Deliveries by the Company and the Stockholder. At the Closing, SSA,
---------------------------------------------
▇▇▇▇▇▇ and the Stockholder shall deliver to Parent, ▇▇▇-▇▇▇▇ and Sub the
following:
(a) Certificates representing the shares of SSA Stock and ▇▇▇▇▇▇ Stock
to be canceled in accordance herewith, with appropriate stock powers duly
endorsed in blank;
(b) Certified resolutions of the Board of Directors of SSA and ▇▇▇▇▇▇
and the Stockholder of SSA and ▇▇▇▇▇▇ approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby;
(c) Governmental certificates evidencing that each of SSA and ▇▇▇▇▇▇
is duly organized and in good standing in the State of Florida;
(d) Certificate of the Secretary of each of SSA and ▇▇▇▇▇▇ attesting
as to the incumbency of each officer who shall execute this Agreement and any
other Company Document on behalf of SSA or ▇▇▇▇▇▇ and certifying as to the by-
laws and charter of SSA and ▇▇▇▇▇▇;
(e) Instruments (including UCC-3 termination statements) releasing any
and all Liens on any of the assets of SSA or ▇▇▇▇▇▇;
(f) An opinion of ▇▇▇▇▇ & Lardner, counsel to SSA, ▇▇▇▇▇▇ and the
Stockholder, in the form of Exhibit 6.1(f) attached hereto;
--------------
(g) Evidence reasonably satisfactory to counsel to ▇▇▇-▇▇▇▇ that the
SSA Surviving Corporation or the ▇▇▇▇▇▇ Surviving Corporation, as the case may
be, has succeeded to, or is the lawful assignee of, all of the Acquisition
Rights of SSA and ▇▇▇▇▇▇;
(h) Payoff letter or other evidence with respect to the discharge of
the Stockholder's personal guarantees with respect to the Indebtedness of SSA
and ▇▇▇▇▇▇;
(i) Letters of resignation for all officers and directors of SSA and
▇▇▇▇▇▇, effective at the Closing;
(j) An IRS Form 2553, Election by a Small Business Corporation, with
respect to the S-Corporation election of Parent;
34
(k) Stock record and minute books of each of SSA and ▇▇▇▇▇▇;
(l) Such other certificates and documents as may be required hereby or
are reasonably requested by Parent at the Closing; and
(m) All consents and approvals necessary to consummate the Merger and
to vest in the SSA Surviving Corporation and the ▇▇▇▇▇▇ Surviving Corporation
good title to the assets of SSA and ▇▇▇▇▇▇ (including the Leases and Equipment).
6.2 Deliveries by Parent, ▇▇▇-▇▇▇▇ and Sub. At the Closing, Parent, Mac-
--------------------------------------
▇▇▇▇ and Sub shall have delivered to SSA, ▇▇▇▇▇▇ and the Stockholder the
following:
(a) Certificate representing the Parent Shares;
(b) Wire transfer of $1,940,000;
(c) Certified resolutions of the Board of Directors of Parent, ▇▇▇-
▇▇▇▇ and Sub approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(d) Governmental certificates evidencing that each of Parent, ▇▇▇-▇▇▇▇
and Sub is duly organized and in good standing in the State of Delaware;
(e) Certificate of the Secretary of each of Parent, ▇▇▇-▇▇▇▇ and Sub
attesting as to the incumbency of each officer who shall execute this Agreement
and any other ▇▇▇-▇▇▇▇ Document on behalf of such entity and certifying as to
the by-laws and charter of such entity;
(f) An opinion of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel to Parent,
▇▇▇-▇▇▇▇ and Sub in the form attached hereto as Exhibit 6.2(f);
--------------
(g) The Letter of Credit (as defined in the Stockholders' Agreement
(as defined below));
(h) Evidence that the personal guarantees of the Stockholder related
to the Indebtedness have been discharged; and
(i) Such other certificates and documents as may be required hereby or
are reasonably requested by SSA, ▇▇▇▇▇▇ or the Stockholder at the Closing.
6.3 Joint Deliveries of the Parties. The parties shall jointly provide
-------------------------------
the following at the Closing:
(a) The SSA Certificate and the ▇▇▇▇▇▇ Certificate shall be duly and
properly filed with the Secretary of State of the State of Delaware and the SSA
Articles and the ▇▇▇▇▇▇
35
Articles shall be duly and properly filed with the Secretary of State of the
State of Florida and each of such documents shall be effective under the DGCL
and the FBCA, as the case may be;
(b) The Stockholder and Parent shall have executed a Consulting
Agreement in the form attached hereto as Exhibit 6.3(b);
--------------
(c) The Stockholder and Parent shall have executed and delivered a
Noncompetition Agreement in the form attached hereto as Exhibit 6.3(c);
--------------
(d) Parent, the Stockholder and the other stockholders of Parent shall
have executed a Stockholders' Agreement in the form attached hereto as Exhibit
-------
6.3(d) (the "Stockholders' Agreement").
------
6.4 Other Actions. Each of the Stock Exchange and the LP Exchange shall
-------------
be consummated.
SECTION 7. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
7.1 Survival of Warranties. Each of the representations, warranties,
----------------------
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto; provided, however, that such representations
-------- -------
and warranties shall expire on the same dates as and to the extent that the
rights to indemnification with respect thereto under Section 8 shall expire.
SECTION 8. INDEMNIFICATION.
8.1 Indemnification by the Stockholder. The Stockholder agrees subsequent
----------------------------------
to the Closing to indemnify and hold the SSA Surviving Corporation, the ▇▇▇▇▇▇
Surviving Corporation, Parent, ▇▇▇-▇▇▇▇, Sub and their respective subsidiaries
and affiliates and persons serving as officers, directors, partners or employees
thereof (individually a "▇▇▇-▇▇▇▇ Indemnified Party" and collectively the "▇▇▇-
▇▇▇▇ Indemnified Parties") harmless from and against any damages, liabilities,
losses, taxes, fines, penalties, costs, and expenses (including, without
limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be
sustained, suffered or incurred by or made against any of them arising out of or
based upon any of the following matters:
(a) fraud, intentional misrepresentation or a deliberate or wilful
breach by SSA, ▇▇▇▇▇▇ or the Stockholder of any of their representations,
warranties or covenants under this Agreement or in any certificate, schedule or
exhibit delivered pursuant hereto;
36
(b) any other breach of any representation, warranty or covenant of
SSA, ▇▇▇▇▇▇ or the Stockholder under this Agreement or in any certificate,
schedule or exhibit delivered pursuant hereto (exclusive of any claims for
indemnification for Taxes or based upon or related to a breach of any
representation, warranty or covenant with respect to Taxes or tax related
matters which are governed by subsections (c) and (d) below; and exclusive of
any claims for indemnification with respect to (i) the Blue Eagle Leases or the
Blue Eagle Agreement or related matters, (ii) the Judgment Liens (as defined
below), (iii) the Split Dollar Policies (as defined below), (iv) the Vehicles
Matters (as defined below), (v) the Coachman Crossing Matters (as defined
below), (vi) the Coin Laundry Leasing Matters (as defined below), (vii) the
Assigned Lawsuits (as defined below), (viii) the Transaction Expenses (as
defined below), and (ix) the Checks Matters (as defined below) which shall all
be governed by subsection (e) below);
(c) any liability of SSA or ▇▇▇▇▇▇ for Taxes attributable to the
periods, or portions thereof, ending on or before the Closing (which has not
been paid or provided for or reserved against by SSA or ▇▇▇▇▇▇ in the Balance
Sheet included in the Interim Financial Statements) or as a result of any breach
of any representation, warranty or covenant with respect to Taxes or tax related
matters (including, without limitation, any representations made pursuant to
Sections 1.7 or 3.7 hereof), but excluding the Florida sales tax matters
governed by Subsection 8.1(d) below;
(d) any liability of SSA or ▇▇▇▇▇▇ for Florida state sales taxes (i)
attributable to the periods, or portions thereof, ending on or before the
Closing (which has not been paid or provided for or reserved against by SSA or
▇▇▇▇▇▇ in the Balance Sheet included in the Interim Financial Statements) or
(ii) as a result of or relating to any breach of any representation, warranty or
covenant with respect to Taxes or tax related matters (including without
limitation, any representations made pursuant to Sections 1.7 or 3.7 hereof);
and
(e) (i) any breach of any representation or warranty contained in
Section 3.28 hereof, (ii) any liability or obligation arising out of, relating
to or resulting from the Peppertree Village Condominium Association, Inc.'s
lawsuit against SSA (as shown in Schedule 3.10 attached hereto and officially
-------------
known as Case No. 88-15942-13) and the judgment lien related thereto, and the
Goldkind Family Trust's lawsuit against SSA (as shown in Schedule 3.10 attached
-------------
hereto and officially known as Case No. 96-3958-CO-42) and the judgment lien
related thereto (the "Judgment Liens"), (iii) any liability or obligation
arising out of, relating to or resulting from the Split Dollar Life Insurance
Policies maintained by SSA and/or ▇▇▇▇▇▇, including the policies maintained at
any time with respect to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (the "Split Dollar
Policies"), (iv) any liability or obligation arising out of, relating to or
resulting from the vehicles, including any vehicles leases, to be retained by
the Stockholder as set forth on Schedule 3.9 (the "Vehicles Matters"), (v) any
------------
liability arising out of, relating to or resulting from (w) the lawsuit entitled
Commercial Laundry Corp. vs. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee under the Land Trust
------------------------------------------------------------------------------
Agreement dated December 4, 1992 vs. Decade Properties, Inc., Case No. 90-
------------------------------------------------------------
003809-CI-007, (x) the Indemnity Addendum to the Laundry Lease Agreement Between
▇▇▇▇. ▇. ▇▇▇▇▇▇▇ & Sons, Inc. As Agent For ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Not Personally But
As Trustee U/A/D 12/4/92 and SSA, dated as of April 9, 1993, for Coachman
Crossing Apartments, ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇, and (y) the
lawsuit entitled ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee under the Land Trust
-------------------------------------------------
37
Agreement dated December 4, 1992 vs. Sun Services of America, Inc., Case No.
-------------------------------------------------------------------
97-2423-CI-20 (collectively, the "Coachman Crossing Matters"), (vi) any
liability or obligation in excess of $245,000 arising out of, relating to or
resulting from the SSA Promissory Note in the principal amount of $350,000
payable in favor of Coin Laundry Leasing Corp. or Assign (the "Coin Laundry
Leasing Matters"), (vii) any obligation or liability arising out of, relating
to or resulting from the lawsuits entitled Sun Services of America, Inc. vs.
---------------------------------
Days Inn Main Gate West & Gateway Tours, Case No. 96-5648 and Sun Services of
--------------------------------------- ---------------
America, Inc. vs. ▇▇▇▇▇▇ Properties, Case No. 95-6861-CI-7 (the "Assigned
-----------------------------------
Lawsuits"), (viii) any liability or obligation for any expenses of SSA, ▇▇▇▇▇▇
or the Stockholder relating in any way to the Mergers or the transactions
contemplated by this Agreement, including, without limitation, legal, accounting
or other professional expenses, to the extent that the aggregate amount of such
expenses exceed $110,000 (the "Transaction Expenses"), and (ix) (y) all
commission checks payable by SSA, ▇▇▇▇▇▇, Atlantic Coin Laundry, Coin Operated
Apartment Laundries, Coin Laundry Leasing, M&M Laundry Equipment and/or
Certified Coin Laundries dated on or prior to April 17, 1997 (the "Commission
Checks") and (z) any other checks payable by SSA, ▇▇▇▇▇▇ and/or any other entity
referenced in the immediately preceding clause (y) hereof dated on or prior to
April 14, 1997 (the "Other Checks") to the extent that the aggregate amount of
the Commission Checks and the Other Checks exceed $322,829.15 in the aggregate
(the "Checks Matters").
8.2 Limitations on Indemnification by the Stockholder. Notwithstanding
-------------------------------------------------
the foregoing, the right of ▇▇▇-▇▇▇▇ Indemnified Parties to indemnification
under Section 8.1 shall be subject to the following provisions:
(a) No indemnification shall be payable pursuant to Subsection 8.1(b)
above to any ▇▇▇-▇▇▇▇ Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 8.1 shall exceed $25,000 in the aggregate,
whereupon only the amount in excess of $25,000 shall be recoverable in
accordance with the terms hereof;
(b) No indemnification shall be payable to a ▇▇▇-▇▇▇▇ Indemnified
Party with respect to claims asserted pursuant to Subsection 8.1(b) after the
first anniversary of the date of this Agreement (the "Expiration Date");
provided, however, that if on or prior to the Expiration Date a specific state
-------- -------
of facts shall have become known which may give rise to a claim for
indemnification under Subsection 8.1(b) and a ▇▇▇-▇▇▇▇ Indemnified Party shall
have given written notice to the Stockholder of such facts known by such ▇▇▇-
▇▇▇▇ Indemnified Party at such time, then the right to indemnification with
respect to such claim shall remain in effect without regard to when such matter
shall be finally determined and disposed of;
(c) No indemnification shall be payable to a ▇▇▇-▇▇▇▇ Indemnified
Party with respect to a claim asserted pursuant to Subsection 8.1(c) or 8.1(d)
after 60 days after the expiration of the statute of limitations (if any)
applicable to such claim and the relevant governmental authorities, whether
foreign, federal, state or local, are no longer able to assess and enforce
liability with respect to such claim against any of the ▇▇▇-▇▇▇▇ Indemnified
Parties;
(d) The indemnification obligations of the Stockholder hereunder with
respect to claims asserted by a ▇▇▇-▇▇▇▇ Indemnified Party pursuant to
Subsection 8.1(b) shall be limited in
38
the aggregate to $1,500,000 with respect to claims asserted by the ▇▇▇-▇▇▇▇
Indemnified Parties on or prior to the date 6 months after the date of this
Agreement;
(e) The indemnification obligations of the Stockholder hereunder with
respect to claims asserted by a ▇▇▇-▇▇▇▇ Indemnified Party pursuant to
Subsection 8.1(b) or 8.1(d) shall be limited in the aggregate to $750,000 with
respect to claims asserted by ▇▇▇-▇▇▇▇ Indemnified Parties after the expiration
of 6 months from the date of this Agreement; and
(f) Payment for any indemnification obligation under Section 8.1 shall
be made by Stockholder (i) first, by surrendering to Parent that number of duly
endorsed shares of Parent Common Stock (which shares shall be delivered free and
clear of any and all Liens), valued at a per share price of $14.54, which price
shall be subject to appropriate adjustment for any stock dividend, stock split,
recapitalization or similar transaction, equal to the total amount of such
indemnification obligation and (ii) second, in the event that the Stockholder
cannot deliver such number of shares of Parent Common Stock, in cash.
The limitations contained in this Section 8.2 shall not apply to the
indemnification obligations arising under Sections 8.1(a) or 8.1(e).
8.3 Indemnification by Parent, ▇▇▇-▇▇▇▇ and Sub. Each of Parent, ▇▇▇-▇▇▇▇
-------------------------------------------
and Sub agrees to indemnify and hold the Stockholder harmless from and against
any damages, liabilities, losses and expenses (including, without limitation,
reasonable fees of counsel) of any kind or nature whatsoever (whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) which may be sustained or
suffered by the Stockholder arising out of or based upon any of the following
matters:
(a) fraud, intentional misrepresentation or a deliberate or wilful
breach by Parent, ▇▇▇-▇▇▇▇ and Sub of any of their representations, warranties
or covenants under this Agreement or in any certificate, schedule or exhibit
delivered pursuant hereto; and
(b) any other breach of any representation, warranty or covenant made
by any of Parent, ▇▇▇-▇▇▇▇ and Sub in this Agreement or in any certificate
delivered by Parent, ▇▇▇-▇▇▇▇ and Sub hereunder.
8.4 Limitation on Indemnification by Parent, ▇▇▇-▇▇▇▇ and Sub.
---------------------------------------------------------
Notwithstanding the foregoing, the right of the Stockholder to indemnification
under Section 8.3 shall be subject to the following provisions:
(a) No indemnification pursuant to Subsection 8.3(b) shall be payable
to the Stockholder, unless the total of all claims for indemnification pursuant
to Subsection 8.3(b) shall exceed $25,000 in the aggregate, whereupon only the
amount in excess of $25,000 shall be recoverable in accordance with the terms
hereof;
(b) No indemnification shall be payable to the Stockholder with
respect to claims asserted pursuant to Subsection 8.3(b) above after the
Expiration Date; provided, however,
-------- -------
39
that if on or prior to the Expiration Date a specific state of facts shall have
become known which may give rise to a claim for indemnification under Subsection
8.3(b) and the Stockholder shall have given written notice to Parent of such
facts known by the Stockholder at such time, then the right to indemnification
with respect to such claim shall remain in effect without regard to when such
matter shall be finally determined and disposed of; and
(c) The indemnification obligation of Parent, ▇▇▇-▇▇▇▇ and Sub with
respect to claims asserted by the Stockholder under Subsection 8.3(b) shall be
(i) limited in the aggregate to $1,500,000 with respect to claims asserted by
the Stockholder on or prior to the date 6 months after the date of this
Agreement and (ii) limited in the aggregate to $750,000 with respect to claims
asserted by the Stockholder thereafter.
8.5 Notice; Defense of Claims. An indemnified party may make claims for
-------------------------
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
If indemnification is sought for a claim or liability asserted by a third party,
the indemnified party shall also give written notice thereof to the indemnifying
party promptly after it receives notice of the claim or liability being
asserted, but the failure to do so shall not relieve the indemnifying party from
any liability except to the extent that it is prejudiced by the failure or delay
in giving such notice. Such notice shall summarize the bases for the claim for
indemnification and any claim or liability being asserted by a third party.
Within twenty (20) days after receiving such notice the indemnifying party shall
give written notice to the indemnified party stating whether it disputes the
claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within twenty (20) days
after receipt of notice thereof, it shall be deemed to have accepted and agreed
to the claim, which shall become immediately due and payable. The indemnifying
party shall be entitled to direct the defense against a third party claim or
liability with counsel selected by it (subject to the consent of the indemnified
party, which consent shall not be unreasonably withheld) as long as the
indemnifying party is conducting a good faith and diligent defense. The
indemnified party shall at all times have the right to fully participate in the
defense of a third party claim or liability at its own expense directly or
through counsel; provided, however, that if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised by its counsel that representation of both parties
by the same counsel would be inappropriate under applicable standards of
professional conduct, the indemnified party may engage separate counsel at the
expense of the indemnifying party. If no such notice of intent to dispute and
defend a third party claim or liability is given by the indemnifying party, or
if such good faith and diligent defense is not being or ceases to be conducted
by the indemnifying party, the indemnified party shall have the right, at the
expense of the indemnifying party, to undertake the defense of such claim or
liability (with counsel selected by the indemnified party), and to compromise or
settle it, exercising reasonable business judgment. If the third party claim or
liability is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available such
information and assistance as the indemnifying party may reasonably request and
shall cooperate with the indemnifying party in such defense, at the expense of
the indemnifying party.
40
8.6 Exclusive Remedy. The Indemnification provided for in Sections 8.1
----------------
and 8.3 shall be the sole and exclusive remedy of the ▇▇▇-▇▇▇▇ Indemnified
Parties and the Stockholder, respectively, against the other party for matters
arising out of the representations, warranties, covenants and agreements of such
party set forth in the Agreement.
SECTION 9. MISCELLANEOUS.
9.1 Fees and Expenses. Each of Parent, ▇▇▇-▇▇▇▇ and Sub on the one hand,
-----------------
and the Stockholder on the other hand, shall bear its or his own expenses and
costs in connection with the preparation and negotiation of this Agreement and
the consummation of the transactions contemplated hereby. The Stockholder
expressly represents, acknowledges and agrees that any expenses of SSA, ▇▇▇▇▇▇
or the Stockholder relating in any way to the Mergers and the transactions
contemplated hereby, including, without limitation, legal, accounting or other
professional expenses, which are borne by SSA or ▇▇▇▇▇▇ have been paid by SSA or
▇▇▇▇▇▇ on or prior to the Closing and are included in the Indebtedness.
9.2 Governing Law. This Agreement shall be construed under and governed
-------------
by the internal laws of the State of Florida (without giving effect to choice or
conflict of laws provisions the effect of which would cause the application of
the domestic substantive law of any other jurisdiction); provided that the
General Corporation Law of the State of Delaware shall, to the extent
applicable, also govern the provisions of this Agreement relating to the
effectuation of the Mergers.
9.3 Notices. All notice and other communications required to be given
-------
hereunder, or which may be given pursuant to or relative to the provisions
hereof, shall be in writing and shall be deemed to have been given when
delivered in hand or mailed, postage prepaid, by first class United States mail,
certified return receipt requested as follows:
If to SSA, ▇▇▇▇▇▇ or to
-----------------------
the Stockholder: c/o Sun Services of America, Inc.
---------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., #▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
41
If to Parent, Mac-Gray c/o Mac-Gray Co., Inc.
----------------------
or Sub: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Cable, Esq.
9.4 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement relied upon
by either party hereto have been expressed herein or in such Schedules or
Exhibits or in such other writings.
9.5 Assignability; Binding Effect. This Agreement may not be assigned by
-----------------------------
any party hereto without the prior written consent of each other party hereto.
This Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and any permitted successors and assigns.
9.6 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
9.7 Execution in Counterparts. For the convenience of the parties and to
-------------------------
facilitate execution, this Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one (1) and the same document.
9.8 Amendments. This Agreement may not be amended or modified, nor may
----------
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
9.9 Publicity and Disclosures. No press releases or public disclosure,
-------------------------
either written or oral, of the transactions contemplated by this Agreement,
shall be made by any party to this Agreement without the prior knowledge and
written consent of Parent, or Mac-Gray, on the one hand and SSA, or Stockholder,
on the other hand.
9.10 Covenant of Parent, Mac-Gray and Sub. Parent, Mac-Gray and Sub agree
------------------------------------
not to contact, or solicit any inquiries from, the Department of Revenue of the
State of Florida with the
42
intention of causing any audit or investigation relating to any pre-closing
state sales tax liabilities of SSA or ▇▇▇▇▇▇.
9.11 Covenant of Stockholder. The Stockholder hereby agrees to pay,
-----------------------
perform and discharge when due all of the obligations and liabilities of SSA and
▇▇▇▇▇▇, if any, arising from and after the Closing under the Vehicles Matters
and the Split Dollar Policies. The Stockholder covenants and agrees that, as
promptly as possible after the Closing, he shall (a) have assigned to him and
shall assume the obligations of SSA and ▇▇▇▇▇▇ under, the Split Dollar Policies
and any Vehicles Matters which are not solely in the Stockholder's name and (b)
obtain insurance coverage for each of the vehicles subject to the Vehicles
Matters. From and after the Closing, the Stockholder shall execute and deliver
or cause to be executed and delivered such documents and take such other actions
as may be requested by Parent, Sub or Mac-Gray to ensure that title to the
assets used in the business of SSA and ▇▇▇▇▇▇, other than assets being assumed
by or transferred to the Stockholder pursuant to the terms of this Agreement, is
fully and effectively transferred to Parent, Mac-Gray and/or Sub, as the case
may be.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the parties hereto have caused this Agreement and Plan
of Merger to be executed as of the date set forth above by their duly authorized
representatives.
MAC-GRAY II, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO
MAC-GRAY CO., INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO
MAC-GRAY ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO
SUN SERVICES OF AMERICA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇. ▇▇▇▇▇▇ COIN-OP-LAUNDRY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
STOCKHOLDER:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Agreement and Plan of Merger
44
